AMITY GLOBAL BUSINESS SCHOOL, CHANDIGARH

“A study on comparative analysis of non-performing assets between

private and public sector banks.”

Dissertation Report

Submitted in partial fulfillment of the requirements for

Master of Business Administration (MBA)

By
Purnima Ghugtiyal
A30701920036
Batch of 2020-22

Submitted to
Prof. Madhur Joshi Sharma
Designation of Faculty Guide

April 2022

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 DECLARATION
Title of Dissertation is “A study on comparative analysis of non-performing assets between
private and public sector banks.”

I declare

 That the work presented for assessment in this summer internship report is my own, that
it has not previously been presented for another assessment and that my debts (for words,
data, arguments and ideas have been appropriately acknowledged.
 That the work conforms to the guidelines for presentation and style set out in the relevant
documentation.
 The Plagiarism in the report is ________ % (permissible limit is 15%).

Date: __________

Student Name: - Purnima Ghugtiyal

Enrolment No. : - A30701920036

Course & Batch: - MBA (2020-2022)

ii
 FACULTY GUIDE CERTIFICATE
This is to certify that Purnima Ghugtiyal of Masters of Business Administration at Amity

Global Business School, Chandigarh has completed the Dissertation Report on “A study on
comparative analysis of non-performing assets between private and public sector banks.” under
my guidance.

The report has been checked for Plagiarism and is within limits of acceptance.

Faculty Guide Name:-

Prof. Madhur Joshi Sharma

Designation:-

iii
 ACKNOWLEDGEMENT
I take this opportunity to express my sincere thanks; gratitude to all those people who extended
their whole hearted co-operation and helped me in completed this project. There are great
number of people who helped us during the development of project titled “A study on
comparative analysis of non-performing assets between private and public sector banks”. It is
difficult to list out and therefore I state out by expressing my general indebtedness for everyone
who was associated with it.

I would like to thank Prof. Madhur Joshi Sharma and other faculty members for their whole
hearted co-operation

Finally I pay gratitude to my parents for their co-operation and interest,

Regards

Purnima Ghugtiyal

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 TABLE OF CONTENT

S.NO. CHAPTER NO. PARTICULAR PAGE NO.

1. CHAPTER 1 INTRODUCTION

1.1 Overview
1.2 Banking sector
1.3 Type of banks in India
1.4 Digital banking in India
1.5 History of banking sector
1.2.1 Meaning of NPA
1.2.2 Type of NPA
1.2.3 Assets Classification
1.2.4 Why assets become NPAs?
1.2.5 Reasons behind NPAs
1.2.6 Impact of NPA on the Banking Sector

2. CHAPTER 2 REVIEW OF LITERATURE

3. CHAPTER 3 RESEARCH METHODOLOGY

3.1 Introduction
3.2 Sources of Data collection
3.3 Objective of study
3.4 Scope of study
3.5 Significance of study
3.6 Research Problem
3.7 Research Design
3.8 Sample units

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 3.9 Sample Size

4. CHAPTER 4 DATA COLLECTION AND ANALYSIS

5. CHAPTER 5 SUMMARY, CONCLUSION AND

RECOMMENDATION
5.1 Summary
5.2 Findings
5.3 Conclusion
5.4 Recommendation

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 ABSTRACT

Nationalized banks, commercial banks, and specialized banking institutions make up Indian
banking. NPA are a challenge that all banks are confronting today, whether they are public or
private sector banks. Non-performing assets have been the single biggest source of annoyance
for India's banking sector. The lenders might loose money if the borrowers cease paying interest
or principal at loan. Non-performing assets are a type of loan like this. Non-performing assets are
wreaking havoc on India's banking system. This study looks at data from public or private
sectors of banks while from the previous five years. On the basis of secondary data, the research
article aims to analyse various non-performing asset ratios. This research study provides a
conceptual understanding of non-performing assets, as well as several non-performing asset
ratios and a compare the NPA’s in public and private sector banks.

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 CHAPTER- 1

INTRODUCTION

1.1 Overview

The banking sector plays a very important role in society they provide loans to businesses for the
growth of the economy. And a strong banking sector means a healthy economy. But everything
has its advantages and disadvantages and the same is with providing loans to businesses that
carry credit risk, which arises from the failure of a borrower to fulfill its obligations either during
a transaction or on a future obligation. And the failure of the banking sector also impacts other
sectors and now a day’s non-performing assets are the most important concern in India. The
growth of the healthy banking sector depends upon its NPAs. A high level of NPAs means the
high possibility of more credit defaults and it also affects the bank's net worth. This NPA
problem affects both banks and the economy. And in the Indian banking sector, reflects the
state’s health of trade and industry. In today's India, nonperforming assets are a major source of
worry in the banking sector and other financial institutions. Non-performing assets are loans that
do not fulfil the established payment conditions of interest amount of EMI (Equated Monthly)
payments. NPAs are also referred to as consumer and commercial loans. When commercial loans
are past due for more than 90 days, they become NPAs, but consumer loans become NPAs when
they are past due for more than 180 days. There have been a number of recent instances
involving large corporations that are pending with Indian banks. Bhushan Steel is an example of
a company that defaulted on a debt of Rs. 56,022 crore, of which only 63.5 percent (= Rs.35, 571
crore) has been recovered so far.

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1.2 Banking Sector

Banking sector plays an important role in economy. We can also say that it is the financial pillar
of financial sector. Banking sector is very important for the economic development of a country
that its financing requirements of trade, industry, and agriculture are met with a higher degree of
commitment and responsibility. And the growth of the financial industry is linked to the growth
of the country. In India, banks are playing a crucial role in the socio-economic progress of the
country after independence.

Indian banking system consists of commercial and cooperative banks. Commercial banks are an
important part of any country. A commercial bank is profit-oriented financial institution that
takes public deposits and makes loans to the general population. Commercial banks are public,
private, and foreign banks.

The banking industry is important for country's economic prosperity. COVID-19, which rocked
the country in early 2020, has had a negative impact on many industries' growth. The financial
sector is one example of a sector that has been harmed. This epidemic has a negative impact on
the Indian banking system, which is already struggling with growing non-performing assets.
According to the governor of the RBI, the economic impact of the pandemic might result in more
non-performing assets and capital erosion for banks. The economic consequences of the
pandemic are projected to increase the banking sector's non-performing assets. Under the
baseline scenario, the percentage of Gross NPAs is expected to rise to 15.2 percent by March
2021. The RBI announced the COVID-19 economic package on March 27, 2020, to help the
economy by lowering the CRR to 100 basis points and the repo rate to 75 basis points, as well as
a three-month lending moratorium, followed by subsequent rate cuts and regulatory relief. The
effectiveness of these efforts for economic recovery is expected to put a lot of pressure on the
financial sector.

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1.3 Type of Banks in India

There are several types of banks, like as:

Commercial Banks

By taking deposits and disbursing loans, commercial banks exist exclusively to make a profit.
They might be owned by the government or by private individuals or companies. These banks
are grouped into 4 categories:

 Public sector banks: These are the banks in which the Government of India owns a
significant portion of the equity.
 Private sector banks: A private company, an individual, or a group of people holds the
majority of the shares in these institutions.
 Regional rural banks: These are one-of-a-kind commercial banks that loan at a lower rate
to rural farmers in order to strengthen the rural economy.
 Foreign banks: These are banks with branches all Over the country that are based
elsewhere.

Co-Operative Banks

Cooperative banks were established to improve societal welfare by supplying agricultural and
allied sectors with short-term low-interest loans. Co-operative banks are financial institutions
that are owned and operated by their members. This means that a co-operative bank's clients are
also its proprietors. These can be further categorized as:

 Rural co-operative banks: These mostly fund agriculture-related businesses like as

farming, dairying, and fish farming, as well as small-scale industries and self-
employment.
 Urban co-operative banks: These financial institutions provide loans to individuals,
businesses, small businesses, and homeowners.

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Specialized Banks

During 1982 and 1990, the government developed a number of specialist banking institutions to
meet the needs of industries like agriculture, international commerce, housing, and small
businesses. In India, the growth of financial services began with notable financial firms such as:

 NABARD: (National Bank for Agriculture and Rural Development, 1982) to support
agricultural activities.
 EXIM Bank: Bank (Export-Import Bank of India, 1982) to promote export and import.
 National Housing Bank: (1988) to finance housing projects.
 SIDBI: (Small Industries Development Bank of India, 1990) to fund small-scale
industries.

Payments Banks

Payments banks are a novel type of bank created by the RBI in 2014 to operate on a smaller
scale with little credit risk. The primary goal was to increase financial inclusion by providing
banking and financial services to the unbanked and under banked. Payments banks have some
restrictions, such as the ability to take deposits of up to 2 lakh per client and the inability to
provide loans or personal loans. They can, however, provide both savings and current accounts,
as well as ATM and debit cards, online banking, and mobile banking. E-banking in India evolved
as result of the flexibility of processing online payments using mobile apps.

Right now India has 6 Payment banks that are:

 Airtel payment bank

 Fino
 Jio payment bank
 India post payment bank
 NSDL payment bank
 Paytm payment bank

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Small Finance Banks

RBI approved small finance banks in 2016 to provide financial inclusion to persons who are not
covered by traditional banks. It's a special type of bank that uses current technology to give
savings and lending to small enterprises, smallholders, and micro and tiny industries at
affordable costs.

Here’re some of the operational small finance banks in India:

 AU small finance bank

 Capital small finance bank
 Equitas small finance bank
 ESAF small finance bank
 Fincare small finance bank
 Janalakshmi small finance bank
 Northeast small finance bank
 Suryoday small finance bank
 Ujjivan small finance bank
 Utkarsh small finance bank
1.4Digital banking in India

All banking operations that were previously only possible by entering a bank branch–opening an
account, moving cash, making payments, and so on–have now been computerized. In 2016, GOI
announced the UPI System and BHIM by the National Payments Corporation of India kicking
off the digital payments revolution with mobile banking.

Following technological improvements, a number of fintechs in the nation have taken online
payments to the next level by partnering with traditional banks to provide a wide range of
financial services. In 2021, Niti Aayog advocated establishing full-stack 'digital banks,' which
would provide all of their services through the internet rather than through physical locations. In
India, this is likely to transform digital banking.

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1.5 History of the Banking Sector

Banking in India forms the basis for the country's economic development. Significant changes in
the banking system and management have been evident in recent years with the advancement of
technology, taking into account people's needs.

Until 1991, there was no concern for the quality of assets in the Indian banking system, the focus
was on a wider number of branches and increased job creation. It was in 1991 that the former
RBI Governor Mr. M Narasimham was appointed to review the banking system to unlock the
banking system in India in terms of increased banking efficiency and improved customer service.
The main function of any bank is to invest and provide loans in various fields such as personal
loans, housing loans, agricultural and industrial loans. But in recent years, the rise in non-
performing assets has become a major concern for the banking sector because banks are very
cautious and tighten their grip on debt relief.

The banking industry has three stages of development:

The Early Phase, which lasted from 1770 to 1969, was Phase I.

Phase II: From 1969 through 1991, the country was nationalized.

Phase III: The Liberalization or Banking Sector Reforms Phase, which started in 1991 and is still
going strong today.

The "Bank of Hindustan," founded in 1770 in the then-Indian city of Calcutta, was the country's
first bank. However, this bank didn’t succeed and closed its doors in 1832. Over 600 banks were
establish in the country before to independence, but only a few survived. Various other banks
were established in India. They were: The General Bank of India (1786-1791) Oudh Commercial
Bank (1881-1958) Bank of Bengal (1809) Bank of Bombay (1840) Bank of Madras (1843).

Banking was created when civilizations needed a way to pay for goods and services from other
countries using something that could be easily sold or facilitated. Banking processes were
formerly carried out in the classical civilizations using ad hoc ways. Formal banking emerged in
the twentieth century. Banking in India has progressed from a primitive to a contemporary way
that has no precedent in global history.

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1.2.1 Meaning of NPA

A non-performing asset is a system used by financial institutions when there are loans and
principal payments that are overdue and where no interest has been paid for some time.
Generally, loans become NPAs with 90 days or more left, although some lenders use a shorter
window to consider a loan or past expectations. A loan is classified as an idle asset when it
cannot be repaid to the borrower. It causes the property to no longer produce money for the
borrower or the bank because the interest is not paid to the borrower. In such a case, Non-
performing assets are debts which have not been paid back and are not producing any revenue
for the lender. Nearly Rs. 6.5 million crore in debts were described as a non-assets as of 2017,
resulting in a financial catastrophe.

1.2.2 Type of NPA

 Gross NPA
 Net NPA

Gross NPA: - The total numerical value of all debts which have gone bad debts is referred to as
gross NPA. It is an advance that has been written off, for which the bank has made provisions,
and which is still recorded in the bank's books.

Gross NPA Ratio = Gross NPAs / Gross Advance

Net NPA: - Commercial banks use the term "net NPA" to refer to the amount of provision for
bad and doubtful debts that are less than the quantity of non-performing loans. Commercial
banks frequently lend a precautionary sum to cover outstanding obligations.

Net NPA Ratio = Gross NPAs – Provisions

1.2.3 Assets Classification

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  Standard Assets

A standard asset is something that does not reveal any flaws and does not provide a higher risk to
the firm than usual. As a result, any existing loans, both agricultural and non-agricultural, that
have not become non-performing assets may be classified as standard assets.

 Sub-Standard Assets

Any asset that has been non-performing for less than or equal to 12 months is considered a sub-
standard asset. On sub-standard assets, a general provision of 10% on outstanding must be made.

 Loss Assets

Assets that has been non-performing more than a year and haven’t receive a loss advance.
According to the RBI, banks must facilitate 100 percent of unsecured pending loan amounts.

1.2.4 Why Assets become NPAs?

There are many reasons responsible for increasing NPAs. The banking industry must thrive;
otherwise, it would have a direct influence on the country's economic and financial strength.
Increasing of NPAs is nothing but the failure of the banking sector along with other sectors.

Following are a few reasons for assets becoming NPAs:

 Lack of proper screening and follow-up.

 Poor auditing methods and a lack of transparency in accounting.
 Lack of actual business culture.
 Legal protections for mortgages and debt are insufficient.
 Economic policy and the environment have changed.
 Assets are classified according to a list of requirements.
 Directed financing to specific industries.
 There is a lack of cooperation between banks and financial institutions.
 A distinction between agricultural and non-agricultural loans must be made.
 Due to market conditions being adverse, the promoters are unable to raise their
percentage of stock from their means or through a public offering.

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1.2.5 Reasons behind NPAs.

There are only factors behind NPAs:

 Internal factors.
 External factors.

INTERNAL FACTORS

 Diversion of funds for:

 Taking up a new project.
 Expansion/diversification /modernization.
 Helping /promoting associate concerns regarding time/cost overrun during the
project implementation stage.
 Business Failure.
 Inefficiency in management.
 Slackness in credit management and monitoring.
 Inappropriate Technology/technical problem.
 Lack of coordination among lenders.

EXTERNAL FACTORS

 Recession.
 Input/power storage.
 Price escalation.
 Exchange rate fluctuation.
 Accidents and natural calamities, etc.
 Changes in government policies in excise/ import duties, pollution control orders, etc.

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1.2.6 Impact of NPA on the Banking Sector

The rise of non-performing assets in the Indian banking sector has a negative influence on the
banks' profitability as well as their credibility. The enormous increase in non-performing assets
in commercial banks is depleting the public sector banks' capital base to its utmost. When banks
begin to lose money, it undermines the faith of their consumers. If depositors lose faith in their
banks, they will begin withdrawing their funds, resulting in the financial crisis system. As a
result, non-performing assets must keep below a certain level to ensure the banks' long-term
viability and stability.

Profitability

Money documented as a poor assets as both a result of poor consumer perceptions is referred to
as a nonperforming asset (NPA). Because money is blocked, the bank's prodigality is reduced
not just by the quantity of NPA, but also by the level of revenue that could have been invested in
a return-generating project or asset. As a result, NPA affects not just present profits but also
future profits, perhaps resulting in the loss of a long-term profitable opportunity. Another
consequence of decreased profitability is a low ROI, which has a negative influence on the
bank's present earnings.

Liquidity

Lower earnings cause money to be blocked, resulting in loss of available cash, forcing the
company to take funds for a shorter period of time, paying greater charges. Other cause for NPA
due to the lack of finances is the bank's inability to execute its functions. Payments and dues are
made on a regular basis.

Involvement of management

Another indirect cost incurred by the bank as a result of nonperforming assets includes
management time and effort. Manager's time and effort would be best invested on other
productive duties that would have generated greater results than of dealing with and regulating
NPA. Banks today employ specialized personnel to manage with and manage NPA which comes
at a cost to the institution.

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Credit loss

If a bank has a problem with nonperforming assets it will hurt its market credit value. This will
lose its goodwill, brand image, and credit, all of which will have an unfavorable influence on
consumers who deposit money in banks.

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 CHAPTER: - 2

REVIEW OF LITERATURE
Reddy, P.K. (2002) the experiences of various Asian nations in dealing with NPAs are discussed
in this study. It also examines the impact of the changes on the number of nonperforming assets
and proposes solutions based on lessons learned from other nations.

Satpathy, I, Patnaik, B.C.M. (2010) the purpose of this study was to look at the reasons for non-
performing assets in commercial bank house loans. For this, debtors of the loans were polled
using specially designed questionnaires, and recommendations were made to solve the situation.

Das, S. (2010): The author has discussed NPAs and reviewed the parameters that are actually the
causes of NPAs in this paper, and has come to the conclusion that market failure, willfully
failures, poor close and guidance, non-cooperation from banks, poor set of rules, lack of
entrepreneurship, and diversion of funds are the main causes of the never-ending growth of these
non-performing assets in Indian banks.

Rajeev, M., Mahesh, H.P., (2010): This study paper examines the developing trend of NPAs in
India from a variety of perspectives, as well as the problem's detection through constant
monitoring.

Rajput, N., Arora, A.P., and Kaur, B. (2011): This study was conducted to determine the
movement of nonperforming assets in India's public sector banks by examining the institutions'
operational effectiveness in handling NPAs.

Chaudhary, K., Sharma, M. (2011): This study aimed to assess the effective management of
non-performing assets by public and private sector banks. This analysis was carried out using
statistical methods.

Kaur, H., and Saddy, N.K. (2011): This study was conducted with the goal of better
understanding the idea of non-performing assets and identifying the primary elements that
contribute to the rise in NPAs, and also the causes for large NPAs and their impact on the Indian
banking sector and operations.

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Rai, K. (2012) This study looked at the operational performance of a few commercial banks to
determine the emerging patterns of increasing non-performing assets and the most effective
methods to take to manage them, such as credit evaluation and the development of a tracking
department.

Patidar, S. Kataria, A. (2012): The article examines the share of nonperforming assets as
elements of lending, and comparison research was conducted between public and private sector
banks to determine the difference in NPA and the influence of priority sector lending on total
NPA. This study made use of statistical procedures such as regression and ration analysis.

Kumar, M., Singh, G. (2012): From the viewpoint of senior bankers in India's public sector
banks, this research focuses on the key elements that contribute to the non-performing assets
problem, as well as the effective strategies required for NPA management.

Rakshit, D., Chakrabarti, S. (2012): This research focuses on determining the amount of NPAs in
banks and the primary reasons for accounts in financial institutions changing to non-performing
assets.

Gupta, J., Jain, S. (2012): The ongoing study looks at the performance and lending methods of
mos successful cooperative banks, whose clients have taken out a variety of loans.

Rajput, N, Arora, A.P., and Kaur, B. (2012): This study focuses on the operational efforts of the
public sector banks in managing non-performing assets under the provisions of rigorous asset
categorization regulations. This article examines the mobility of nonperforming assets within
Indian public sector banks as well as the performance of the institutions' inadequate NPA
management.

Gupta, B. (2012): This study discusses research on SBI and Associates, as well as public sector
banks, to better comprehend the idea of non-performing assets their size, and the key reasons for
their rise, as well as to evaluate management effectiveness in dealing with NPAs.

Patnaik, B.C.M., and Satpathy, I. (2012): This research project aims to investigate the major
causes of rising non-performing assets in co-operative bank capital loans. Various borrowers
were polled for the objective of this study in order to determine the reasons of NPAs.

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A.K. (2012): This study employs an analytical method to examine the profitability indicators of
non-performing assets and to highlight the primary variables that are causing NPAs to expand at
an ever-increasing rate. For this empirical study, statistical procedures such as regression and
correlation analysis were applied.

Patidar and Kataria (2012): The influence of priority sector lending on bank total non-performing
assets was investigated using a multiple linear regression model and profitability ratios.
According to the findings, priority sector lending has a considerable influence on overall NPAs
at public sector banks. Priority sector lending, on the other hand, has had no discernible influence
on private sector banks' overall non-performing assets.

B.S., Waraich, S., Gautam, V. (2013): this research focused on the Punjab Cooperative Bank,
which attempted to investigate the impact of new credit facilities on NPAs in cooperative banks,
as well as the growing trends in NPAs in relation to various term loan, as well as a comparative
analysis was conducted between banks to determine the current scenario of NPAs.

Srinivas, K.T. (2013) this study attempts to find out the causes of loans, assets, and advances that
turn into non-performing assets in the Indian banking sector, as well as to provide strong and
effective remedies to the problem of rising NPAs.

Kamra, S. D. (2013): This study was done to analyze the position of NPAs in a few selected
public sector banks namely State Bank of India, Punjab National Bank, and Central Bank of
India (CBI). It mostly focuses on the measures and the policies pursued by the banks to
effectively manage their NPAs and finally, it suggests a robust strategy for the speedy and
effective recovery of the NPAs.

Stuti, Bansal, S. (2013): In this study, an attempt was made to analyse the operational
performance of Public Sector Banks and Private Sector Banks in India on trends and concerns
relating to non-performing assets. This study also looks at how well private and public sector
banks have managed non-performing assets.

Selvarajana, B., and Vadivalagan, G. (2013): This study was performed to show the importance
and status of non-performing assets in Indian banks. The research was conducted with a focus on
priority sector loans.

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Bamoriya et al. (2013): The influence of a few key financial heads on scheduled commercial
banks' nonperforming assets (NPA) was investigated. A multiple regression approach is used to
analyse the data. They discovered that total assets and total investment on NPAs had a
substantial influence. Total advances and net interest income, on the other hand, have no bearing
on NPAs.

Joseph, A. L. (2014) this research focuses on the patterns of non-performing assets within the
banking sector, as well as the internal, external, and other variables that contribute to the rise of
Non- performing assets within the banking sector, as well as recommendations for reducing the
pressure of growing NPAs.

Arora, N., Ostwal, N. (2014) the different classifications and analyses of loan assets of public
and private sector banks were examined in this study. NPAs are the most serious concern for
banks, according to this report, and the banking sector has a larger level of NPAs than private
sector banks.

M.S., Thangavelu, R. (2014) with the use of secondary data, this study was conducted with
analyzing the goal of analyzing the notion of non-performing assets, as well as the various
components of loan assets advanced by public and private sector banks.

Yadav, S. (2014): This research was created with the use of secondary data, and the author
attempted to highlight the rising patterns of non-performing assets inside the Indian banking
sector, as well as preventative strategies to manage the rising NPAs.

Dutta. A (2014): This study examines the increase of non-performing assets in India's public and
private banks, as well as the efficiency of private and public sector banks by sector.

Satpal (2014): This research attempted to assess the true definition of a non-performing asset  as
well as the elements that lead to the development of NPAs, as well as the causes for greater
NPAs and their effect on Indian financial institutions.

Tripathi, L. K., Parashar, A., Mishra, S. (2014): The current study aims to study the effect of
priority sector loans as well as non-collateral advances provided to selected sectors by financial
institutions such as SBI and PNB. This study was carried out using a statistical method.

15
Jajashree, Kotnal, R., Ahmed, I. Naikwadi, and M: The fundamental ideas of non-performing
assets are explained in this study. It also entails determining the size of NPAs and the primary
causes of rising NPAs in the banking industry. This research focused on Corporation Bank in
particular.

Rathore and et al. (2016): It is discovered that there is a favorable relationship between total
advances, net profits, and bank NPAs as a result of bank mismanagement, which is not good.
They discovered that the positive relationship between NPA and profitability is attributable to
poor client selection. Due to a shortage of capital, banks are unable to provide loans to new
clients, which has a negative impact on their liquidity. They advised banks to do thorough pre-
sanction evaluations and enforce compulsory disbursement controls in order to minimize non-
performing assets.

Vivek Rajbahadur Singh (2016): He believes the rise is attributable to the Act's effectiveness in
recovering commercial banks' non-performing assets.  According to him, this Act has turned out
to be a gift in disguise for commercial banks, as they are primarily using it to recover their non-
performing assets in order to improve their profits.

Vivek Rajbahadur Singh (2016): The NPA level of Indian banks is greater than that of
international banks, according to the study. Recovery is an issue for large borrowers, not for
small borrowers. The government should establish measures for the quicker resolution of
ongoing cases and minimize forced loans to the priority sector.

Veena and Pathi (2018): In comparison to which was before performance of gross and net NPAs,
post-merger performance of NPAs is higher and growing. They found that the number of non-
performing assets has been rising year after year, putting the bank's profitability at risk, and
advised that the government establish measures for speedier resolution of ongoing cases to
address the problem of NPAs.

Nithia Mary Aisac et al. (2018): To determine whether there is a meaningful association between
NPAs and GDP, researchers employed multiple regression and matched sample testing (GDP).
The test revealed there is a substantial link between India's NPAs and GDP.

Ambuj Tiwari and Vipul Garg (2018): Investors, depositors, lenders, and others lose trust as the
NPA ratio rises. It also leads to inefficient money recycling, which has a negative impact on

16
credit deployment. The rising number of nonperforming assets (NPAs) will drive up loan interest
rates. This will have a direct impact on investors seeking financing to build infrastructure,
industrial projects, and other enterprises. It causes a shortage of capital in Indian marketplaces.

Bhawna Mittal (2019): The impact of growing NPA in India was noted, and it was said that NPA
has grown in the recent decade. It signifies that a substantial section of the bank's assets have
stopped to generate revenue, lowering the bank's profitability and capacity to earn further credits.
Bank profitability declines are producing negative economic shocks and putting customer
savings at risk.

Chethan Dudhe (2017): The influence of non-performing assets on bank profitability was
investigated. According to the report, public sector banks are more vulnerable to non-performing
assets which would have a negative impact on their profitability. Accurate credit management,
which involves activities such as related to paying, proper credit evaluation, post-sanction
follow-up, and need-based credit, is recommended to control NPAs.

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 CHAPTER: - 3

RESEARCH METHODOLOGY

3.1 Introduction

Any study effort demands careful consideration of the research methodology and data analysis
that will be used. We have attempted to give some information on how to create a research plan
for a study in this part. We provide a high-level overview of the research methodologies section
of a research proposal, followed by data analysis templates for various design types. Our
objective is to give you a head start rather than to address all of your questions.

3.2 Sources of Data collection

The data collected for the preparation of this dissertation is secondary. Secondary data is
information that has already been created and is ready to be used. The information on non-
performing assets and their composition, as well as the categorization of loan assets, earnings,
and advances of various banks, was gathered from the Reserve Bank of India's official website
and other banking websites. For this research, the researcher must use all Public Sector Banks
and all Private Sector Banks from the RBI's permitted public data.

3.3 Objective of study

 To study the effect of the past on the banking sector.

 To compare the NPA between public and private sector banks.
 To understand the causes and effects of NPA.
 To examine the policies being used by these banks to reduce the increasing NPA.

3.4 Scope of study

 This study assists to understand the effects and causes of NPA.

 This study analyzes the past trends of NPA of public and private sectors banks.

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3.5 Significance of study

This research will assist banks in determining how their non-performing assets compare to those
of other banks. NPA are a concern that currently affects all banks. This non-performing asset
analysis is extremely useful in identifying non-performing assets as well as the reasons for non-
performance. The principal source of revenue for a bank is interest on loans. When a borrower
fails to make payments or principal on a loan, non-performing assets are formed. Non-
performing assets have such a direct influence on profitability and earnings. As a consequence,
the findings of this study will aid banks in increasing their profitability. This research will be
extremely useful to both sector banks in assessing their effectiveness in handling non-performing
assets in contrast to other banks, as well as in increasing their skills.

3.6 Research problem

The bank's main source of income is interest on loans. The revenue and profitability of any bank
determines its performance. Non-performing assets are today's biggest issue in any bank. Non-
performing assets have an impact on a bank's performance since profitability is based on interest
on loans, and if a bank is unable to recover both interest and principal, it develops non-
performing assets. Non-performing assets have a direct impact on profitability. This report is
based on an examination of non-performing assets in both public and private sector banks.

3.7 Research Design

A research design is a framework or blueprint for conducting research. It is required for

gathering information to discuss an issue. Research aimed at assisting decision-makers in
assessing, reviewing, and selecting the most appropriate course of action in a particular scenario.
Descriptive studies are often the most effective approaches for gathering data that demonstrates
correlations and describes the world as it is. Descriptive studies are used to describe what is
happening or what already exists. Descriptive research will be used as the research design.

 Organizes data in such a way that arises during analysis using description as a method.
 Illustrations like graphs and charts are frequently used to help the readers.

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3.8 Sample Unit

In this research we take 2 public sector bank and 2 private sector bank.

 PUBLIC SECTOR BANK

 State bank of India
 Punjab national bank
 PRIVATE SECTOR BANK
 HDFC
 ICICI

3.9 Sample Size

In this study we used 5 years of financial data from 2016-2017 to 2020-2021.

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 CHAPTER: - 4

DATA COLLECTION AND ANALYSIS

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 Net Profit/Loss

Year SBI PNB HDFC ICICI

2017 10484.1 2021.62 14549.64 9801.09

2018 -6547.45 336.19 17486.73 6777.42

2019 862.23 -9975.49 21078.17 3363.3

2020 14488.11 -12282.8 26257.32 7930.81

2021 20410.47 1324.8 31116.53 16192.68

Average 7939.492 -3715.14 22097.68 8813.06

Table: 1

Chart: 1

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 GROSS NPA

Years SBI PNB HDFC ICICI

2017 11234.99 55370.45 5885.66 42551.54

2018 223427.5 86620.05 8606.97 54062.51

2019 172750.4 78472.7 11224.16 46291.63

2020 149091.9 73478.76 12649.97 41409.16

2021 126389 104423.4 15086 41373.42

Average 136578.7 79673.08 10690.55 45137.65

Table: 2

Chart: 2

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 Net NPA

Years SBI PNB HDFC ICICI

2017 36809.72 32702.11 1843.99 25451.03

2018 51871.3 48684.29 2601.02 27886.27

2019 65894.74 30037.66 3214.52 13577.43

2020 110854.7 27218.89 3542.36 10113.86

2021 58277.38 38575.7 4554.82 9180.2

Average 64741.57 35443.73 3151.342 17241.76

Table: 3

Chart: 3

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 Loans Advances

Years SBI PNB HDFC ICICI

2017 1571078 4149493 554568.2 464232.1

2018 1934880 438826 658333.1 51235.29

2019 2185877 462416 819401.2 586646.6

2020 2325290 476853 993702.9 645290

2021 2449498 67346 1132837 733729.1

Average 2093325 1118987 831768.4 496226.6

Table: 4

Chart: 4

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 Return on Assets

Year SBI PNB HDFC ICICI

2017 0.41 0.19 1.88 1.1

2018 -0.19 -1.6 1.93 0.87

2019 0.02 -1.25 1.9 0.39

2020 0.38 0.04 2.01 0.81

2021 0.48 0.15 0.5 1.42

Average 0.22 -0.494 1.644 0.918

Table: 5

Chart: 5

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 Capital Adequacy Ratio

Years SBI PNB HDFC ICICI

2017 15.33 17.21 14.55 17.39

2018 16.12 16.25 14.82 18.42

2019 14.52 15.22 17.1 16.89

2020 13.13 14 19 16

2021 13.74 14.32 18.79 19.12

Average 14.568 15.4 16.852 17.564

Table: 6

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 Chart: 6

CHAPTER 5

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary

After analyzing data, we noticed a significant difference in NPAs both banking sectors. In fact, I
observed that public-sector banks have considerably larger non-performing assets than private-
sector banks. The ratios of gross non-performing assets and net nonperforming assets in public
sector banks are greater than that in private sector banks. The percentages of gross NPA and net
nonperforming assets in public sector banks are greater than in private banks. The quantity of net
and gross non-performing assets in public banks is higher than in private sector banks. A larger
level of non-performing assets, I observed, had a negative influence on a bank's profitability.
When comparing the state of public and private sector banks, the research finds that private
sector banks are better at managing non-performing assets than public sector banks, even if they
are not as effective. Furthermore, unlike public sector banks, which have suffered losses of
thousands of crores of rupees, private banks have managed to generate profits while being
plagued by growing NPA trends. This money being stranded in non-performing assets has a
direct impact on the profitability of banks, as their revenue is largely based on the interest
received on the amount of loans they have advanced. In comparison to private sector banks, the
amount of non-performing assets is larger in public sector banks, according to this study.

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5.2 Findings

In this study, four banks have conducted. Two public and two private. And three data sets are
taken for research. Firstly we take the net profit/loss made by these banks in 5 years. After that
gross NPA of these banks of 5 years. And at last net NPA of these banks of 5 years.

As seen in chart 1 of net profit/loss, it is very clear that HDFC bank with the largest net profit of
Rs. 22097.68 crores and the PNB with a net loss of Rs. -3715.14 crores. In 2017 and 2018 PNB
was a profit but after that, till 2020 bank was at loss, and in 2021 also increased a little bit in
profit. In 2018 SBI was also at a net loss but after 2018 it increased till 2021 with a net profit of
Rs. 20410.47 crores. In 5 years ICICI bank was very profitable but neither at loss. In 2017 all the
banks were at some point but after that, till 2020 they increased the expected PNB bank at loss in
2019 to 2020, and in 2020 – 2021 ICICI bank, SBI bank, and HDFC bank at a good profit.
HDFC bank a profit most of the years. Both the public banks were at a net loss in these years but
the private banks were never at a net loss.

The gross non-performing assets of a bank and the return of the loans given by the bank define
the bank's net profitability. In chart 2 we can see that SBI has issued the more loans in history. In
2018, SBI issued a total amount of loan Rs. 22.3427.46 crores, out of which a net total is Rs.
136578.7 crores resulted as NPA, due to that SBI suffered a net loss of Rs. -6547.45 crores.

And when we look at the data of HDFC bank of 2018, they issued very less loans and there gross
NPA is Rs. 8606.97 crores. Out of which a net total is Rs. 10690.55 crores. And due to that
HDFC at the net profit of Rs. 17486.73 crores.

It we see the data of PNB bank of year 2021 they issued loans of Rs. 104423.42 crores. And
PNB is the only bank who suffered very high net loss compare to other banks. And total average
gross NPA of 5 years is 79673.08.

ICICI bank in the same situation here is not very positive, as its net profit had been increasing till
the year from 2020 to 2021. And the average gross NPA is 45137.6 and there is very less
difference in the gross NPA.

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As seen in Chart 4, HDFC banks average is 831768.4 is very high compare to other banks and
after that they manage to stay profitable in these 5 years. And ICICI bank also manage stay
profitable at the average loans advances of 496226.6.

In 2017 PNB bank has very high loans advances of Rs. 4149493 crore and after that there
advances is little bit same but in 2021 it is very low because they suffer loss in 2020 and there
average is net loss at -3715.14.

SBI suffer loss in 2018 at -6547.45 and in the same year there loans advances is Rs. 1934880
crore. And after 2018 there loans advances is increases and profit also increases after 2018.

As seen in Chart 5 the average return on assets of PNB bank is in negative -0.494% they suffer
loss in so many years. As compare to that HDFC is the only bank which is on profit in every year
and there average percentage is 1.644%.

As I mention SBI suffer loss in 2018 that’s why SBI return on assets percentage is -0.19% but at
the average is 0.22%. Compare to this ICICI bank never suffer loss in these 5 years and also has
normal Return on Asset percentage.

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5.3 Conclusion

We can assume that there is no way to totally remove non-performing assets from a bank.
However, we should make every effort to lower the bank's non-performing assets. For public
sector banks and the government, non-performing assets are becoming a big issue. Currently, the
government is implementing a variety of steps to reduce the number of non-performing assets in
public sector banks. It has identified important sectors and banks where the number of non-
performing assets is quite large. The central bank's authority to intervene in bank NPAs has been
expanded. In order to strengthen the central bank's control over non-performing assets in India,
an ordinance was passed. In public sector banks, non-performing assets are the most serious
issue. In public sector banks, there is a need to enhance management of non-performing assets. 
The bank should have a strict credit policy and take necessary action against non-performing
assets. Before giving loans, the bank should investigate the credit worthiness of all applicants.
The government should also establish greater measures for the quicker resolution of ongoing
cases, as well as limit required lending to the priority sector, as this is the key problem area
where NPAs are badly impacting the economy as a whole.

5.4 Recommendation

Many loans are given to big companies without thoroughly analyzing the repaying capacity. That
companies and the owners has so before issuing loans banks has to analyzed the capacity of the
companies. And some of the banks are not yet free from government and political influence and
some of the politicians are using their power to grant loans to undeserved business persons.
Banks have to make same rules for everyone to avoid the NPA and also banks has to conduct
field study to avoid the NPAs. Banks do not monitor how loans are spent once they have been
granted. Many deliberate defaulters are wasting their loans, which will not help their businesses
expand in any manner they have to observe how loans has been spending.

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 Bibliography
Dr. Ashok Kumar Gupta, Priyanka Gautam. (2017). Non-Performing Assets (NPAs): A Study
of Punjab National Bank. International Journal of Science Technology and
Management. Vol No. 6. Issue No. 1. January 2017. Retrieved from International Journal of
Science Technology and
Management:http://www.ijstm.com/images/short_pdf/1484978546_K1062ijstm.pdf

Rajiv Ranjan, Sarat Chandra Dhal. (2003). Non-Performing Loans and Terms of Credit of Public
Sector Banks in India: An Empirical Assessment. Reserve Bank of India Occasional.

A study on analyzing the trend of NPA level in private sector banks and public sector banks AL
Joseph, M Prakash - International Journal of Scientific and …, 2014 - researchgate.net

Non-performing assets of Indian public, private and foreign sector banks: an empirical
assessment G Vallabh, A Bhatia, S Mishra - The IUP Journal of Bank …, 2007 - ideas.repec.org

Bank, European Central (2017-10-18). "Regulatory and supervisory responses in Europe to the
current financial environment". European Central Bank - Banking Supervision. Retrieved 2021-
02-14.

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