Study of NPA and their impact on public sector banks


Submitted to Lovely Professional University In partial fulfillment of the requirements for the award of degree of MASTER OF BUSINESS ADMINISTRATION

Submitted by: Group No Q24

Supervisor :

Anil Aswal Atif Ashfaq

RQ2005B64 (11013856) RQ2005B67 (11013908)

Parmeet Mam

Manpreet kaur RQ1703A18 (7440070116) Vikalp Saxena RQ2005B63(11013514)




INTRODUCTION  Introduction of Indian Banking Sector  Introduction of Public Sector Bank

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A bank is a financial institution that provides banking and other financial services. By the term bank is generally understood an institution that holds a Banking Licenses. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making assets. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so-called Non-bank. Banks are a subset of the financial services industry.

The word bank is derived from the Italian banca, which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Moneylenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table.

Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset. Development of banking industry in India followed below stated steps.

 Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to rates of interest.

 Banking in India has an early origin where the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of the East India Company, was the turn of the agency houses to carry on the banking business. The General Bank of India was first Joint Stock Bank to be established in the year 1786. The others which followed were the Bank Hindustan and the Bengal Bank.

 In the first half of the 19th century the East India Company established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks

also known as Presidency banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established in 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken by the newly constituted State Bank of India.

 The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve Bank of India Act, 1934 which was followed up with the Banking Regulations in 1949. These acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing, supervision and control of banks. Considering the proliferation of weak banks, RBI compulsorily merged many of them with stronger banks in 1969.

 The three decades after nationalization saw a phenomenal expansion in the geographical coverage and financial spread of the banking system in the country. As certain rigidities and weaknesses were found to have developed in the system, during the late eighties the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level committee was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial system. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the banking system was introduced in 1992-93. The objective of the reform measures was to ensure that the balance sheets of banks reflected their actual financial health. One of the important measures related to income recognition, asset classification and provisioning by banks, on the basis of objective criteria was laid down by the Reserve Bank. The introduction of capital adequacy norms in line with international standards has been another important measure of the reforms process.

1. Comprises balance of expired assets, compensation and other bonds such as National Rural Development Bonds and Capital Investment Bonds. Annuity certificates are excluded. 2. These represent mainly non- negotiable non- interest bearing securities issued to International Financial Institutions like International Monetary Fund, International Bank for Reconstruction and Development and Asian Development Bank. 3. At book value. 4. Comprises accruals under Small Savings Scheme, Provident Funds, Special Deposits of NonGovernment


in recognition of the need to introduce greater competition which could lead to higher productivity and efficiency of the banking system. new private sector banks were allowed to be set up in the Indian banking system. More importantly. thanks to the economic liberalization of the country. the industry was merely focusing on deposit mobilization and branch expansion. which has changed business environment in the country. But with liberalization.  A high level Committee. but in the days ahead banks will have to prepare themselves to face new challenges. (iii) The shares should be listed on the stock exchange. in 1993. (iv) The headquarters of the bank should be preferably located in a centre which does not have the headquarters of any other bank. particularly in the areas of Capital Adequacy Ratio. It will have to achieve capital adequacy of eight per cent from the very beginning. Classification of Government guaranteed advances. accounting and other policies as laid down by the RBI. In the post-nationalization era. These new banks had to satisfy among others. Some of the recommendations of the Committee. productivity and efficiency of banks. There is no doubt that banking sector reforms have improved the profitability. the sector has become very competitive with the entry of many foreign and private sector banks. The face of banking is changing rapidly. was constituted by the Government of India in December 1997 to review the record of implementation of financial system reforms recommended by the CFS in 1991 and chart the reforms necessary in the years ahead to make the banking system stronger and better equipped to compete effectively in international economic environment. provisioning requirements on standard advances and more disclosures in the Balance Sheets of banks have been accepted and implemented. and (v) The bank will be subject to prudential norms in respect of banking operations. no new private sector banks were allowed to be set up. However. the following minimum requirements: (i) (ii) It should be registered as a public limited company. The other recommendations are under consideration. under the Chairmanship of Shri M. it found many of its advances under the non-performing assets (NPA) list. During the pre-liberalization period.  The banking industry in India is in a midst of transformation. The Committee has submitted its report to the Government in April 1998. Narasimham. 5|Page . The minimum paid-up capital should be Rs 100 crore. on prudential accounting norms.

New generation private banks c. state bank of India and its subsidiaries. Further scheduled commercial banks divided into the Public Sector Banks. foreign banks. there are 57 scheduled cooperatives and 16 scheduled co-operative banks. Non-scheduled Banks CO-OPERATIVE SECTOR 6|Page . and regional rural banks.operative. foreign banks are 36. Regional Rural Banks mainly sponsored by Public Sector Banks PRIVATE SECTOR BANKS a. private sector banks. Whereas scheduled co-operative banks are classified into scheduled urban co operative and scheduled state co. State Bank of India and its associate banks called the State Bank group b. As far as the number is concerned.CLASSIFICATION OF SCHEDULED BANKING STRUCTURE IN INDIA The scheduled banks are divided into scheduled commercial banks and scheduled co operative banks. Public Sector Banks 2. Development Banks PUBLIC SECTOR BANKS a. Scheduled Co-operative Banks e. And private banks have been classified into old and new private sector banks. total public sector banks are 27. Co-operative Sector Banks 4.In the scheduled co-operative banks.RBI has further classified public sector banks into nationalized banks. Old generation private banks b. the regional rural banks are on the top number. 20 nationalised banks c. and regional rural banks are 196. Today the overall commercial banking system in India may be distinguished into: 1. private sector banks are 30. Foreign banks in India d. Thus in scheduled commercial bans. private Sector Banks 3.

State Co-operative Banks 2. Export Import Bank of India 9. Industrial Investment Bank of India (IIBI) 5.The co-operative banking sector has been developed in the country to the supplement the village money lender. Primary Land Development Banks 8. Industrial Finance Corporation of India (IFCI) 2. Land Development Banks 5. Primary Agricultural Development Banks 7. National Bank for Agriculture and Rural Development (NABARD) 8. Industrial Credit and Investment Corporation of India (ICICI) 4. The co-operatiev banking sector in India is divided into 4 components 1. State Land Development Banks DEVELOPMENT BANKS 1. SCICI Ltd. Urban Co-operative Banks 6. Industrial Development Bank of India (IDBI) 3. Primary Agriculture Credit Societies 4. Small Industries Development Bank of India (SIDBI) 6. 7. Central Co-operative Banks 3. National Housing Bank 7|Page .

there are 25 banks in the public sector viz. cutting in cost. To reduce the disparities the government nationalized 6 more commercial banks in 1980 government came to own 28 banks including SBI and its 7 subsidiaries. while generates more profit. They have to ensure that each every account is profitable and product should be such. After independence. Now. When there is a thin margin in banking operation. and huge volume but of less value business transactions. Now. and private sector banks-both old and new generation. In terms of sheer geographical spread. Further.PUBLIC SECTOR BANKS Before the independence. the banking system in India was primarily associated with urban sector. In 1969 the government nationalized 14 major commercial banks. which makes the public sector banks inherently uncompetitive. The statistics are as follows: a network of 64000. 19 commercial banks exclusive of Regional Rural. Reduction of branches to achieve cost saving has not received a munch thrust as it should. Previously.branches-one branch for every 14000 Indian with over 64 crores customers. In July 1993. The public sector banks have to build up the cost-benefit culture in their operations. foreign banks. 8|Page . The returns on assets have to be improved. Today. State Bank of India and its 5 associates. the banks had to spread out into rural and unbanked areas and make credit available to the people of those areas. we are having a fairly well developed banking system with different classes of bankspublic sector banks. Public sector banks are characterized by mammoth branch network. better recovery of loan and to reduce high level of NPAs”. relatively lesser mechanization. i. This labour intensive network has built-in cost. the PSBs in Indian have to compare them with the highly profitable bank with regards to operating expenses.e. Indian banks were relying on high credit deposit ratio. New Bank of India was merged with Punjab National Bank. the Indian banks have to depend on the volume of high business turnover. improving productivity. Still the wide disparities continued. the public sector system is the largest. huge work force. social objectives and their own legacy system and procedures. the public sector banks in India have to increase the turnover. “Improving profitability in general requires efforts in several directions.

The rapid growth.  Inadequate checks and balances in credit process  The absence of loan supervision  A failure to improve collateral position as a credit deteriorate  Excessive overdraft lending. Following are the 26 public sector banks.20 commercial banks exclusive of Regional Rural.  Infrequent customer contact. outdated legal system which notonly encourages the incidence of NPAs but also prolongs their existence by placing a premium on default and delay in finalization of rehabilitation packages by the Board for Industrial and Financial Reconstruction are some of the major causes for the rising of NPAs.  The absence of portfolio concentration limits. Andhra Bank 3. 1. State Bank of India and its 6 associates. There are 26 banks in the public sector viz.  Incomplete credit files  The absence of the assets classification and loan-loss provisioning standards  A failure to control and audit the credit process effectively. Allahabad Bank 2. Bank of India 9|Page . Growth of large number of medium and big industries and entrepreneurs in diverse fields were the direct results of the expansion of activities of banks. Bank of Baroda 4.  Cursory financial analysis of borrower.  Excessive centralization or decentralization of lending authorities. Although S & P cited as a reasons for mounting of NPAs priority sector lending.CHALLENGES FOR THE PUBLIC SECTOR Indian banks functionally diverse and geographically widespread have played a crucial role in the socio-economic progress of the country after independence. forever lead to strains in the operational efficiency of the banks and the accumulation of non-performing assets (NPAs) in their assets portfolio. The following deficiencies were noticed in the managing Credit Risk:  The absence of written policies. The uncomfortably high level of NPAs of banks however is a cause for worry and it should be brought down to international acceptable levels for creating a vibrant and competitive financial system. NPAs are serious strains on the profitability of the banks as they cannot book income on such accounts and their funding cost provision requirement is a charge on their profit.

Indian Overseas bank 12. investment was Rs. 1078103 crore in india by public sector bank. Punjab National Bank 13. Dena Bank 10. UCO Bank 16. Central Bank of India 8. 10 | P a g e . Bank of Maharashtra 6. 1) State Bank of Hyderabad 2) State Bank of India 3) State Bank of Mysore 4) State Bank of Travancore Deposits Total deposits mobilized by the Public Sector Banks as at the end March 2011 stood at Rs. Punjab and Sind Bank 14. Oriental Bank of commerece 19.5. Investment During 2010-2011. Syndicate Bank 15.Vijaya Bank 18. IDBI Bank State Bank of India State Bank of India & its associates. Credit The rate of growth in the total loan disbursement by the banking sector was lower during 2010-11 due largely to lower economic activity. Indian Bank 11. Canara Bank 7. 38. The total assets and advances position as at end March 2011 stood at Rs. Union Bank of India (UBI) 17.77% which is higher than growth rate of end March 2010.72.483 crore showing a growth of 15. Corporation Bank 9. 2920408 crore of the public sector bank.

And it is also found that the many banks have shown positive figures in reducing NPAs as compared to the past years.However. accepts the deposits from the people and secondly they lend this money to people who are in the need of it. The problem of NPAs is danger to the banks because it destroys the healthy financial conditions of the them. The banking sector accepts the deposits of the people and provides fruitful return to people on the invested money. If any advance or credit facilities granted by bank to a borrower become non-performing.In the nation economy also service industry plays vital role in the boosting up of theeconomy. Thus. MEANING OF NPAS An asset is classified as non-performing asset (NPAs) if the borrower does not pay dues in the form of principal and interest for a period of 180 days. It helps almost every person in utilizing the money at their best. The banking sector plays larger role in channelising money from one end to other end. businessman. Banks first. RBI has taken number steps to reduce NPAs of the Indian banks. However with effect from March 2004. financial conditions and would not affect the image of the banks. or any industry for its development. Banks earn their profits. we may find the input-output system in the banking sector. Due to this problem many Public Sector Banks have been adversely affected to their performance and operations. Indian banking sector has recently faced the serious problem of Non Performing Assets. Non Performing Asset means an asset or account of 11 | P a g e .The banking sector is one of appreciated service industries. However it has been researched that physical products are available because of the service industries.NON-PERFORMING ASSETS The world is going faster in terms of services and physical products. The nations like U. But for providing the better returns plus principal amounts to the clients. then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any regard to the fact that there may still exist certain advances / credit facilities having performing status. By the way of channelising money from one end to another end. Action for enforcement of security interest can be initiated only if the secured asset is classified as Non Performing Asset. In simple words Non Performing Assets problem is one where banks are not able to recollect their landed money from the clients or clients have been in such a condition that they are not in the position to provide the borrowed money to the banks. U. The trust of the people would not be anymore if the banks have higher NPAs. So. The problem of NPAs must be tackled out in such a way that would not destroy the operational. and Japan have service industries more than 55%. This problem has been emerged largely in Indian banking sector since three decade.S. it becomes important for the banks to earn the main source of income for banks are the interest that they earn on the loans that have been disbursed to general person. default status would be given to a borrower if dues were not paid for 90 days. recently.K.

in accordance with the directions or guidelines relating to asset classification issued by RBI. it has been decided to adopt the '90 days overdue' norm for identification of NPAs. 2001. which has been classified by a bank or financial institution as substandard. a nonperforming asset (NPA) shell be a loan or an advance where : Interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan  The account remains 'out of order' for a period of more than 90 days.Accordingly. recovery climate. doubtful or loss asset. it was decided to dispense with 'past due' concept. in respect of an overdraft/ cash Credit (OD/CC)  The bill remains overdue for a period of more than 180 days in the case of bills purchased and discounted  Interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose  Any amount to be received remains overdue for a period of more than 180 days in respect of other accounts.. form the year ending March 31. with effect form March 31.borrower. Due to the improvement in the payment and settlement systems. 2004.upgradation of technology in the banking system. as from that date. in respect of an overdraft/ cash Credit (OD/CC)  The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted  Interest and/ or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose  Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.  An amount due under any credit facility is treated as "past due" when it has not been paid within 30 days from the due date. 12 | P a g e . Accordingly.With a view to moving towards international best practices and to ensure greater transparency. a Non performing asset (NPA) shell be anadvance where Interest and /or installment of principal remain overdue for a period of more than 180 days in respect of a Term Loan  The account remains 'out of order' for a period of more than 180 days. etc. with effect from March 31. 2004.

13 | P a g e . which has remained NPA for a period less than or equal to 12 month. conditions and values – highly questionable and improbable. Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained non-performing and the reliability of the dues: ( 1 ) Sub-standard Assets ( 2 ) Doubtful Assets ( 3 ) Loss Assets ( 1 ) Sub-standard Assets With effect from 31 March 2005. ( 2 ) Doubtful Assets A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard. If asset fails to be in category of standard asset that is amount due more than 90 days then it is NPA and NPAs are further need to classify in sub categories. with the added characteristic that the weaknesses make collection or liquidation in full. – on the basis of currently known facts. if deficiencies are not corrected. Here it is also very important that in this case the arrears of interest and the principal amount of loan do not exceed 90 days at the end of financial year. and the asset has welldefined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss. With effect from March 31.ASSET CLASSIFICATION Categories of NPAs Standard Assets: Standard assets are the ones in which the bank is receiving interest as well as the principal amount of the loan regularly from the customer. The following features are exhibited by substandard assets: the current net worth of the borrowers / guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full. an asset would be classified as doubtful if it remained in the sub-standard category for 12 months. 2005. a substandard asset would be one.

( 3 ) Loss Assets A loss asset is one which considered uncollectible and of such little value that its continuance as a bankable asset is not warranted. 14 | P a g e .although there may be some salvage or recovery value. these assets would have been identified as „loss assets‟ by the bank or internal or external auditors or the RBI inspection but the amount would not have been written-off wholly. Also.

lack of support to the borrowers from the banks at the time of the need.reduction in reserve requirements. The emphasis was put on recent regional and cross country experience in dealing with impaired assets during period of financial crises.slow economic and industrial growth. 15 | P a g e . slump in capital market. the study suggests that given the deficiencies in these areas. Banks have achieved a reasonable degree of success to bring down their existing NPAs but due to heavy slippage of standard accounts to NPA category the overall position continued to deteriorate. prudential norms & risk based supervision but the progress on the structural-institutional aspects has been much slower and is a cause for concern. Although public sector banks have recorded improvements in profitability. This paper also deals with the experiences of other Asian countries in handling of NPAs. It tells about what changes are required to tackle the NPA problem. it is imperative that banks need to be guided by fairness based on economic and financial decisions rather than system of conventions. Dong (2002) Analyzed that the nature of NPAs in the Indian Banking system and discussed the key design features that would be important for the assets reconstruction company to resolve NPAs problem. the author has made an effort to deal with the practical aspects of the problem of management of NPAs right from identification stage till recovery of the dues including other aspects connected with the subject like asset classification. It was suggested that improved recovery mechanism and credit management is the way out to minimize NPA. rehabilitation of sick nonperforming units etc. The main reasons responsible for such a situation include . if reform has to serve the meaningful purpose. assessment of provision. it was pointed out that there may be only a marginal difference in the NPAs of banks‟ lending to priority sector and the bank‟s lending to private corporate sector. It was revealed that the main cause of NPA is non linkage of lending with productive investment and recovery with product sale. reduction of NPAs. Experience shows that policies of liberalization. barriers to entry. Willful defaults by the borrowers. reflecting higher operating costs. capital adequacy. monitoring system for existing and likely NPAs. efficiency (in terms of intermediation costs) and asset quality in the 1990s. "Managing Non-Performing Assets in Banks. The study examined that large NPA hinders the profitability and viability of the banks. competition faced by local industries from the multi-nationals. deregulation and enabling environment of comfortable liquidity at a reasonable price do not automatically translate themselves into enhanced credit flow. Pati (1999) studied the causes and consequences of NPA in Indian banks & suggested the cure of large NPAs. It also suggests mechanisms to handle the problem by drawing on experiences from other countries desai (2002) in his book titled. Against this background. Prashant k reddy (2002) in this article he talks about the financial sector reform in india which has progressed rapidly on aspects like interest rate deregulation . financial indiscipline. etc." highlighted that banks are concerned with their heavy NPA portfolio which was impairing their profitability and are taking all possible steps to contain the same. “NPAs on account of priority sector lending”. overburdened and slow judiciary. they continue to have higher interest rate spreads but at the same time earn lower rates of return. pre-sanction appraisal and post-sanction appraisal and post sanction supervision. In this book.REVIEW OF LITERATURE Goven (1993) in his article.

strong in widening the business coverage but weak in terms of sustainability and viability. highlighted that decade of nineties in last century brought revolution in Indian banking sector. Overtime. favourable macroeconomic and business conditions lead to lowering of NPAs. The empirical analysis evaluates as to how banks‟ non-performing assets are influenced by three major sets of economic and financial factors. have evaluated the performance of DRTs in recovery of bank dues during the years 1996 to 2004. Khan and Singh (2005) in their Report on "Effectiveness of DRTs in Recovery of Bank Dues”. On the revenue side. changes in the cost of credit in terms of expectation of higher interest rate induce rise in NPAs. Business cycle may have differential implications adducing to differential response of borrowers and lenders.e. On the expenditure side. The author further concluded that the high rise in gross and net NPAs of the banking sector in the recent past was at an exponential rate giving an indication that present ongoing recession was taking a heavy toll on corporate credit discipline.A study of Post-Liberalization Period". highlighted that the profitability of the financial institutions largely depended upon the level of income generated through optimum use of the assets after paying the cost of fund for acquiring them and other administrative costs involved therein. factors like horizon of maturity of credit.. They have concluded that the DRTs were effective in recovery of banks' dues to a certain extent and would become more effective. Banks were made free from the clutches of hefty regulations and allowed to decide their own fate.e. positive as well as negative aspects of the Act. summary. He analyzed that this Act empowered banks and financial institutions to directly enforce the security interest which was pledged to them at the time of sanctioning the loan without going through the judicial process of DRT or Civil Courts. "The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act. Saggar (2005) in her research book titled. "Banking Sector Reforms in India . Redefined objective of managing NPAs through profit maximization approach and risk management approach were suggested.2002". Moreover.Muniappan (2002) examined the impact of NPA on banks profits and lending ability. process. provided the given suggestions were implemented in letter and spirit. They must make persistent efforts to improve their profitability. Misra (2003) in his article. better credit culture. the viability particularly of a number of 16 | P a g e . "Managing Non-Performing Assets: A Professional Approach". Ranjan & Dhal (2003) In this study they do the analysis of commercial banks' nonperforming assets(NPAs) in the Indian context. terms of credit. they must bring efficiency in their operations to minimize cost and strive hard to control the booming NPAs. stated that it has been found over the years that the performance of banking sector has been a mixed one i. In regard to terms of credit variables. On the other hand. Rajput (2003) in his thesis titled. He analysed the measures initiated by reserve bank and Government of India for reduction of NPA and suggested that NPA can be avoided at the initial stage of credit consideration by putting in place rigorous and appropriate credit appraisal mechanism. Mukherjee (2003) made an attempt to draw some policy conclusions from the international experiences regarding the resolution of the problem of old bad debts. Kumar (2003) in his paper titled. International experiences suggest that different countries adopted mainly two types of strategies via the formation of Asset Management Companies and the strategy of decentralized restructuring. bank size induced risk preferences and macroeconomic shocks. alternative measures of bank size could give rise to differential impact on bank's non-performing assets. discussed in detail the need. The empirical results from panel regression models suggest that terms of credit variables have significant effect on the banks' non-performing assets in the presence of bank size induced risk preferences and macroeconomic shocks. Author suggested that Indian banks especially public sector banks will have to learn to live up with competitive environment. They have highlighted major defects in DRT system and also gave recommendations to overcome them. " commercial Banks in India". they should increase noninterest income by diversifying their operation into Para banking activities on the lines of new private banks. i.

Viewpoints of the managers regarding problem of NPAs have also been studied by selecting 120 managers from various branches of public sector banks in Punjab. profitability of banks is influenced by a combination of factors such as quality of asset-liability management. Kumar (2005) in his article. " SERFAESI Act: An Effective Recovery Tool". Chugh (2005). SERFAESI Act. would greatly help banks in their efforts to reduce and recover money from NPAs. It is highly impossible to have zero percentage NPAs. which were evident in the system. To improve the efficiency and profitability. Some other important parameters such as assets size.e. As such. According to author. were selected to make comparison between new private sector banks and public sector banks. operating costs. interest and other incomes his research book titled. banks would have to gear up for the challenges of managing growth and consequent risks in the SME sector financing. the NPAs have to be scheduled. Khasnobis (2005) in his article. the success of such efforts in terms of NPAs reduction has been far from satisfactory. The study has covered the prudential norms given by RBI and also analyzed the NPA management policies of public sector banks. They were adopting latest banking technologies day by day and providing quality services to their respective customers at lower cost. A growth driver in this phase would involve financing the emerging Small & Medium Enterprises (SMEs) sector of the economy. the recent developments have also brought out the limitations of the Act. productivity levels. Bose (2005) in his research paper. sustaining this growth in the coming years may require focus on the supply side – capacity building. could be an option worth evaluating. Various steps have been taken by government to reduce the NPAs. Harpreet (2006) in her thesis titled “Credit management and problem of NPAs in Public Sector Banks” highlighted the problem of non-performing assets in public sector banks.. i. She concluded that the public sector banks should move from deposit orientation to profit orientation. " Indian baking today-Impact of Reforms". Impact of economic reforms on banking sector has also been examined in the study. “Non-Performing Assets in Indian Banks” studied that the Indian banking sector faced a serious problem of NPAs. elaborated while there have been several schemes in the past to facilitate the recovery from NPAs. as reflected in the growth of retail banking. 17 | P a g e . Addressing this issue and putting in place a suitable risk mitigation mechanism is going to be a fairly daunting challenge. One way of ensuring focus would be to free up capital – both financial and human – and make them available for sustaining the growth in assets and profitability. Farming out the banks‟ NonPerforming Assets (NPAs) portfolio to asset recovery companies. may have to be addressed first. the non-performing assets (NPAs). Nonetheless. In the recent past a large part of the banking sector‟s growth has been on the back of financing consumption. has attempted to investigate whether new private sector banks were serving properly to different segments of the economic sectors of India specially to economically weaker sector of the society or not and were the employees of these banks satisfied.public sector banks has become a matter of great concern. organisational culture and most critical issue in present context. thereby creating apprehensions amongst banks and financial institutions. Various developments in the banking sector in India have been analyzed by studying the growth of banking sector in Pre-and Post – Independence era. which specialize in this segment of the financial sector. Raul(2005) discussed about the securitization act 2002 that facilitated that the investors to deploy the funds in non-performing asset portfolio of banks and financial institution. “NPAs Emerging Challenges in India” studied that the Indian banking sector has played a commendable role in fuelling and sustaining growth in the economy. to take full advantage of the Act. The extent of NPAs has comparatively higher in public sectors banks. The author has made an attempt to provide a glimpse of the SERFAESI Act against this backdrop. He concluded that public sector banks were coming up fastly to meet the challenges of open competition in financial markets in India. level of NPAs. Notwithstanding this. While the progress on this front is likely to continue. the cool causes of NPAs. But at least Indian banks can try competing with foreign banks to maintain international standard. it was hoped. Profit plans should be developed to help them in recasting their cost estimates for their activities.

A model consisting of two types of factors.Perceptions of borrowers contributing to NPAs have also been studied by selecting 100 defaulters from public sector banks in Punjab. preventive and curative measures can curb the menace of NPA's. The lasting solution to the problem of NPAs can be achieved only with proper credit 18 | P a g e . For this banks have to resort to effective pre-disbursement as well as post-disbursement monitoring. B Krishna Reddy & P Premchand Babu & V Mallikarjuna & P Viswanath(2006)is trying to show the investigation trends in non performing assets. partial and isolated ratios having some hidden and often misconceived assumptions about the structure. Bankers should have frequent interactions and meeting with the borrowers for creating better understanding and mutual trust. While credit growth is needed for survival. asset quality diagnosis and the scenario of NPAs at the bank level. Murali and Krishna (2006) in their paper. particularly the field functionaries. in the recent past. and foreign sector banks in India.sectoral composition of NPAs. The study suggested that prompt. The NPAs are considered as an important parameter to judge the performance and financial health of banks. “Non-Performing Assets of Indian Public. The problem of losses and lower profitability of Non-Performing Assets (NPAs) and liability mismatch in banks and financial sector depend on how various risks are managed in their business. He concluded that the much-publicized fact that public sector banks are inefficient is based on a piecemeal analysis in the form of simple. there is an urgent need for creating proper awareness about the adverse impact of NPAs on profitability amongst bank staff. Private and Foreign Sector Banks: An Empirical Assessment”. Michael(2006) examined how NPA in the loan portfolio affects the operational efficiency of the central cooperative banks. An attempt is made in the paper that what are NPAs? The factors contributing to NPAs. Author suggested that for effective handling of NPAs. Kumar (2006) in his research book titled. the magnitude of NPAs. private. “Are non . This paper aims to find the fundamental factors which impact NPAs of banks. The level of NPAs is one of the drivers of financial stability and growth of the banking sector. The study concluded that there was an urgent need of the time to go in for this kind of system wide analysis to explore the intricacies of the complex system. Author has explored the broad structure of banking system in India. Non-performing Assets (NPAs) have been the most vexing problem faced by PSB. Manmohan Singh would have been remained incomplete without the overhaul of Indian banking sector. explores an empirical approach to the analysis of Non-Performing Assets (NPAs) of public. viz." highlighted that the performance of the banks both in the public and private sectors has become more market driven with growing emphasis on better performance.Performing Assets Gloomy or Greedy from Indian Perspective?” has discussed that the economic reforms initiated by the then finance minister and present prime minister of India Dr. analyzed the overall efficiency of the system in terms of financial parameters into two components: technical efficiency and allocation efficiency. is developed and the behavior of NPAs of the three categories of banks is observed. "Banking Sector Efficiency in Globalize Economy. "Ensuring Qualitative Credit Growth through Effective Monitoring of Advances". observed that there has been a spirit in the lending activity of banks. Besides capital to risk weightage assets ratio of public sector banks. Bhatia (2007) in his research paper entitled. management of credit risk and measures to control the menace of NPAs are also discussed. availability of huge surplus funds with the banks and the losses suffered by the banks in investment and treasury activities.And they are also focus on scenario when the scnerio is change the operations of Public Sector Banks (PSBs). This is due to two factors. it is imperative to ensure that the credit growth does not result in nonperforming advances later. reasons for high NPAs and their impact on Indian banking operations.. viz. macroeconomic factors and bank-specific parameters. The study aimed to check the factors of non-performing assets of the banks. Karunakar (2008) in his article. static. The authors concluded that negligence in monitoring a loan was less excusable than an error at the appraisal stage.

net NPA shows the actual burden of banks. Third. the vulnerability of Indian businesses has increased. return on investment of course. While gross NPA reflects the quality of the assets made by banks. the study observes that increased NPA's in the agriculture sector is a matter of great concern. A constant follow up action and vigil are to be exercised by the operating staff. NPAs do not seem to have spiraled out of control over the 1990s. The public sector banks have managed its assets proficiently. The objective of the study to evaluate NPA‟s i. however. Second. The banks and financial institutions have to take the initiative to reduce NPAs. bank profitability because of the providing of the doubtful debts. The study concludes that there is a huge difference in NPA‟s of public. This raises a concern in the industry and academia because it is generally felt that NPAs reduce the profitability of banks. She made an attempt to establish 19 | P a g e . Mohit Kakkar (2008 -2010)explained that the non-performing assets in banks has assumed great importance. In this article we analyze certain properties of NPAs in Indian Banks over the 1990s . In this she talks about that many provision has to be taken to improve the efficiency of banks and trim down NPA to improve the financial health of the banks. Gross and Net in different banks. A culture change is crept in where repayment of bank loans is no longer assured. The study made a comparative analysis of NPA‟s of public. They are provided three conclusions for emerging India's banking sector. It is due to above factors. Goyal kanika(2010)talk about the public sector banks and their importance in banking sector because public sector banks covers the 82 % of share in the total deposit. propelled by high consumerism and lowering of moral standards. private and foreign banks. NPAs also disturb the Capital Adequacy Ratio (CAV) and economic value addition (EVR) of the banks. larger NPAs are associated with larger advances and vice-versa. the public sector banks are faced with bulging NPAs which results in lower income and higher provisioning for doubtful debts and it will make a dent in their profit margin Radhika(2011) studied the trends in NPA‟s of Indian banks and makes a comparison of public sector banks. The challenges before the banks in India today are the raising NPAs in the retail sector. It is better to avoid NPAs at the market stage of credit consolidation by putting in place of rigorous and appropriate credit appraisal mechanisms. old private sector banks. First.e. Arpita (2010) “are NPA gloomy from Indian perspective” explained that In the global economy prevailing today. using notions of „fibration. Mallick.assessment and risk management mechanism. Diversion of funds and willful default has become more common. Public sector banks figure prominently in the debate not only because they dominate the banking industries. is presented to support the results. private and foreign banks. weaken its financial health and erode its solvency. The study observed increase in gross as well as net NPAs in absolute terms and improved asset quality of banks. but also since they have much larger NPAs compared with the private sector banks. NPAs (as a ratio of loans and advances) are significantly sticky over time. The NPAs have deliterious impact in the interest income on the bank. new private sector banks and foreign banks. Soumitra K(Apr 2010) talks about the Non-performing assets (NPAs) are an important measure of the success of these businesses. A simple co-integration test is carried out and a set of dynamic graphs. as well as of their levels of discretion in carrying out their commercial activities conditional on their role in developing India's entrepreneurship outside the stock markets. Now it is increasingly evident that the major defaulters are the big borrowers coming from the nonpriority sector. Saluja(2010) compared the performance of public and private sector banks and in foreign banks in India with special reference to their non-performing assets.

the erosion of product and geographic boundaries. housing loans etc.such interests can be booked only when it has been actually received. While the primary function of banks is to lend funds as loans to various sectors such as agriculture. An NPA is defined as a loan asset. in recent times the banks have become very cautious in extending loans. The impact of NPA‟s on net profit and impact of total advances on NPA‟s was also examined. Therefore. One fourth credit of total advances was in the form of doubtful asset in the initial year of the nineties and has an adverse impact on profitability of public banks at aggregate or sectoral level indicating high degree of riskiness in credit portfolio and raising question mark on the credit appraisal. which has ceased to generate any income for a bank whether in the form of interest or principal repayment. this paper an attempt to analyze how efficiently Public sector banks have been managing NPA.. Kajal & Monika (2011)They have used statistical tools for projection of trend and to make a comparative analysis of services of Public sector Banks and Private Sector banks. Yadav(2011) This paper deals with the concept of non-performing assets. industry. The profitability of all public sector banks affected at very large extent when non-performing assets (NPAs) work with other banking strategic variables and also affect productivity and efficiency. its magnitude and impact. personal loans. new information technologies and thereby declining processing costs. The reason being mounting nonperforming assets (NPAs). Shantanu In this they mentioned that the banking industry has undergone a sea change after the first phase of economic liberalization in 1991 and hence credit management. a bank cannot book interest on an NPA on accrual basis. As per the prudential norms suggested by theReserve Bank of India (RBI). and less restrictive governmental regulations have all played a major role for Public Sector Banks in India to forcefully compete with Private and Foreign Banks. this has become what is called as a „critical performance area‟ of the banking sector as the level of NPAs affects the profitability of a bank 20 | P a g e .relationship between net profit and NPA‟s and total advances. Increased competition. In other words.

• Sampling Unit: As this study revolves around NPA impact on public sector bank. this study aims to find the impact of NPA on public sector banks SAMPLING DESIGN • Universe In this study the universe is finite and will take into the consideration related news and events that have happened in last few year. journals. SAMPLING TECHNIQUE: - Convenient Sampling: Study conducted on the basis of availability of the Data and requirement of the project. magazines. Data collection Method Secondary data: For the secondary data various literatures.  To evaluate the comparative ratios of the Public Sector Banks with concerned to the NPAs. As there are not possibilities of collecting data personally so no questionnaire is made. So the sampling unit is confined to only the Banking.OBJECTIVE OF STUDY  To understand the impacts of NPAs on the operations of the Public Sector Banks. books. web links are used.  To know the variables available to control NPAs RESEARCH DESIGN Descriptive Research As Descriptive study is conducted with an objective to gain familiarity with the phenomenon or to achieve new insight into it. 21 | P a g e . SCOPE OF STUDY  To study what kind of role NPAs are playing upon the operations of the Bank  Judge the performance and financial position of the company when NPA is considered. Study requires the events that have NPA impact on Public sector banks.

789.930.790.39 2589.75 206.61 641.69 26.432.82 116.53 81.76.79 482.25.900.NET NPA Total assets : Total Assets of the Public Sector Banks increased to Rs.316.09.30 994.389.68 790.79 1.29 948.671.667.46 71.25 299.95 2377.03 263.24 720.41 2167. 129.46 9.79 1.18 3.62 1.55 17836.94 641.41 crore at the march 2011 from Rs. 20 Nationalised bank registered higher growth than the rate of growth recorded by the Public Sector Banks(State bank) as a group.664.19 2784.51 62.46.722.94 2038.52 835.550.83 1406.413.01 30.67 595.632.e.21 1.GROSS NPA. 581.90 341.70 470.73 3.21 76.12 51.47.460.21crore of the previous year.59 3441.59 1.01% recorded during the 2009-2010.75 15.80 45.189.8 52032. 22 | P a g e .75 59.54 1539.21.370.47 1.17 44.08.77 812.63 187.76 in march 2010.397.01.582.102.04 2767.01.21 90.36 2.42 2.39 35.48 36.789.905.775.85.616.58 12346.17 271.74 1.040.984.31 1.95 397.53 2457.23 28.398.41 1058.27 1.529.22 449.55 1803.02 45408.32 1.07crore in march 2011 as compare to the previous year i.975.17 3622.33 1468.46 1594.90 549.42 938.67 23073.72 350.812.255.31 56.70 2981.87 1372.545.33 24.89 650. Rs.501.222.04 1328.050.40 12.599.21 3.41 2004.096.778.73 2.58.954.78.58 40.02 9677.51.97 723.58 1.15 95.77 450.40 1.63 2.07 PUBLIC SECTOR BANK-TOTAL ASSETS.86 631.431.67 325.72.470.98 crore at the end march 2010.67 1.73 42.79 69618.98 1646. 51.33.12 161.68 88.962.376.77 459.43.96 16345.838. Non Performing Assets : Both gross NPA & net NPA at the end of march 2011 were higher then the previous year.55 559.25 1063.53.784.98% as against the growth rate of 18.52 84.74 1381.82 1355.25 368.07 263.030.94 525.42 1920.14 3.14 1842.25 427.44 90. 20 Nationalised Banks registered higher growth rate than the growth recorded by this group. 736.529.00 397.97.37 273.72 18.90 1507.078.42 252.96 10.25 1.655.586.31 20.28.907.133.54 10.02 2663.655.02 18.35 1019.43 78.96.51 1923.64 490.33 562.08 crore as on March 2011 from Rs.97 59454.96.343.85 645.63 981.33 779.88 620.23 4356.88 798.71 2.39 10870.61 573.08 46.21 1209.35 1220.99 14.88 1944.36 1.00 40485.02 2793.70 727.28 965.386.36.98 21.87 2196.97 2316.68 835.00 68.95 2207.79 2.61 1.91 21.98 995.80 48.18 28.699.26 1006.45 662.93 2470.43 1.The gross NPA of pubic sector banks increased to Rs.37.741.12 3090.11 79.38 68.85 422.85 487.442.33.56.406.337.966.39 71.74 548.11.55 76.99 458.59 1665.286.56 698.99 618.919.172.04 12.93 76. During the previous year (20092010).055.53.43 847.63 1030.775.14 442.31.06 4481.72 467.04 628.78.140.45 2129.95.073.469.20 62.80 1.64.21 2.21 271.43 1799.342.19.15 237.45 2. 71.089.23 842.28 4379.Gross NPA is increase from previous year.Similarly the net NPA is increase from Rs.84 1824.54 424. 1078. showing the growth rate of 17.79 2504.047.40 1150.47.09 1.30 313.94 1.325.78 1259. 56.64 1.21.20 966.60.13 total assets 2009-10 2010-11 2008-09 Gross Npa 2009-10 2010-11 2008-09 Net Npa 2009-10 2010-11 10.04 367.16 1677.80 36.76 2.81 999.38 93.74.72 62.25 70976. 44.00 197.64 2786.64.648.572.23.30.645.Name of Bank 2008-09 Public Sector Bank State Bank of India State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore State Bank of India & its Associates Nationalised Bank Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank IDBI Bank Limited Nationalised Banks Public Sector Banks 97.45 863. 36.011.00 292.15 3214.82 1435.382.88 2.78 2394.807.34 486.918.102.41 741.24 86.538.7 13.53 144.18 1923. 70.319.22 70.00 56.402.30 57.757.22 620.30 611.803.93 1994.32 1.25 271.50 10669.58 2.736.69 963.16 1.21.74 54.690.97. 28.718.60 1173.807.311.53 49460.09 2.52 12.44 757.508.46 81286.40 1.00 138.676.53 790.664.94 165.32 16.

28 13371.2 9927.5 881776 2901528 448.01 31849.45 615.61 433.71 4906.9 7175.62 7865.57 898.65 6140 17849.84 2495.6 3076452 455.2 7174.91 448.62 652.77 550.33 6478.64 6649.7 102205 299469 4559.3 11525.44 2375.55 848103 459899 903078 1138903 1145717 434598 2503222 1121464 1049225 1527742 580768 588010 12398687 8596207 1238510 918823 2469510 2439350 609395 2576705 1648561 1045962 556737 1054292 1332657 1304789 536959 3059906 1236598 1229622 1849140 697851 637725 26443092 9721896 113255 63498 207780 244946 41836 189135 86550 85884 30370 81051 119793 77956 29054 259952 75862 64390 135545 49252 63643 2019752 879400 134222 76397 187693 296370 37497 203938 100029 96648 32932 119236 113766 128682 36876 342092 106038 69345 158439 55349 54967 2350516 915486 163147 114599 273993 289552 52464 208111 133898 120913 61216 157761 178809 174227 48732 462220 170183 178842 222304 98302 52286 3161559 1707105 76860 65305 222720 300735 37517 207242 57124 89277 42266 124532 132579 89042 43118 309088 91282 55772 172655 18471 26248 2161833 912123 120633 104585 305833 174107 43958 302143 105823 117025 51125 155499 70696 113468 50880 390536 81332 101219 207492 32236 50730 2579320 916605 142311 126707 424168 248871 33039 402589 125241 141327 61163 171407 107254 150287 52617 443350 104795 90654 208195 52397 52382 3138754 826452 4387.18 8835.43 830050 3968804 23 | P a g e .24 500.25 1711075 4872634 403.96 727.71 445.55 914618.24 3970.82 3727.82 288 2883.08 27275.1 7337.45 3984.04 4534.57 3877.23 673.65 5810.81 336.64 197264 76479.27 2958.54 607.79 3654.78 8623483 21022170 5436.25 25725.1 918369 3268885 589.49 19504.7 20494.73 5936.37 1153.2 4791.2 9885.81 21609.9 4802.16 316.62 5326.13 9753745 36196837 489.29 448.89 684.88 1166.12 1106.86 22191.9 10440 9141.PUBLIC SECTOR BANKS PROFIT Table 3: Public Sectors Banks: Profits Name of the Bank 2009 Nationalised Banks Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerece Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of india Vijaya Bank Total of Nationalized Banks State Bank Of India Associates Of SBI State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore Total of 7 Associates of SBI Total of State Bank Group Total Of Public Sector Banks Gross Profit 2010 Provisions and Contigency 2009 2010 2011 Net Profit 2010 2011 2009 2011 8506.86 13799.69 4696.64 6435.25 7233.2 19399.58 19430.16 822.08 491.77 11237.63 756.91 531.73 3598.38 687.8 919564 3498884 550.

PROFIT The total gross profit of the Public Sector Banks stood at Rs.988.968. 24 | P a g e .3.37 crore during 2010-11 as compared to Rs.84 crore during 2009-10. 2. highest net profit was recorded by the State Bank of India (8264.10.7 crore 2009- crore) apart from these two banks. The net profit of the banks also went up from Rs.52 crore )followed by the Punjab National Bank (4433.04 crore in 2010-11 to Rs 34.688. other banks which have recorded remarkable growth in net profit in year 2010-11.221.

4 0.5 1.4 50.0 54.3 30.0 45.7 63.2 32.005 1.1 0.073 210 291 543 264 53.908 713 218 1.081 792 253 263 210 2.658 398 379 249 1.831 612 646 17.3 38.7 56.1 1.7 34.7 65.632 894 394 785 10.214 2.5 61.Sector-wise (As at end-March 2010) (Amount in ` crore) Sr.147 795 1.646 343 356 8.6 49.505 2.8 56.9 23.0 45.469 206 3.8 56.470 1.0 32.9 54.423 1.6 62.248 558 68 739 902 674 1.1 76.9 44.836 493 595 1.210 2.7 34.301 35.444 2.6 0.0 67.221 488 2.6 61.1 58.8 67.6 36.196 4.529 283 301 463 372 45.0 54. No. State Bank Group State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of India State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Travancore 30.471 1.9 41.SECTOR WISE CLASSFICATION OF NPA Appendix Table IV.3 43.192 911 138 2.5 46.4 51.1 524 280 119 85 18 8 2 4 12 15 17 244 235 3 6 0.0 57.442 1.481 1.5 38.3 0.8 57.1 59.0 40.940 269 290 9.848 19.1 55.0 41.9 65.091 976 1.929 15.2(A): Non-Performing Assets of Public Sector Banks .372 994 2.8 47.9 42.4 44.9 50.007 642 25 | P a g e .9 0.9 58.3 65.1 31.283 389 270 667 2.4 58.8 9.344 10.129 21.1 47.7 1.458 651 642 459 3.317 415 1.3 0.032 478 583 1.9 50.8 3.2 38.9 57. Name of the Bank Priority Sector NPAs Amount Per cent to total Public Sector NPAs Amount Per cent to total Non-Priority Sector NPAs Amount Per cent to total Total NPAs Amount Public Sector Banks Nationalised Banks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank IDBI Bank Ltd.664 1.2 34.8 65.1 43.1 48.1 39.9 55.3 43.0 25.665 2.9 0.9 1.

sector wise classification of NPA Priority Sector NPAs 45. smallscale industry. small business etc.8 Non-Priority Sector NPAs 0. The NPA % of Non-priority sector is with 45% whereas 54% NPAs in priority sector which included agriculture.9 The above chart represent the NPA position in different types of sectors like priority. Non priority and public sector. 26 | P a g e . The highest % of NPAs are in the priority sector.3 53.

Credit loss:Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit. Because of the money getting blocked the prodigality of bank decreases not only by the amount of NPA but NPA lead to opportunity cost also as that much of profit invested in some return earning project/asset.  Irregularity in instalment.  Unpaid overdue bills. which occurred due to wrong choice of client.IMPACT OF NPA ON PUBLIC SECTOR BANKS Profitability:NPA means booking of money in terms of bad asset. which may lead to loss of some long-term beneficial opportunity. So NPA doesn‟t affect current profit but also future stream of profit. Time and efforts of management in handling and managing NPA would have diverted to some fruitful activities. Involvement of management:Time and efforts of management is another indirect cost which bank has to bear due to NPA. which would have given good returns. Another impact of reduction in profitability is low ROI (return on investment). 27 | P a g e . decreased profit lead to lack of enough cash at hand which lead to borrowing money for shot\rtes period of time which lead to additional cost to the company. which is additional cost to the bank.  Bouncing of cheque due to insufficient balance in the accounts. Routine payments and dues. Now day‟s banks have special employees to deal and handle NPAs. Liquidity:Money is getting blocked.  Declining Current Ratio. Early symptoms by which one can recognize a performing asset turning in to Non-performing asset:Four categories of early symptoms:--------------------------------------------------(1) Financial:  Non-payment of the very first instalment in case of term loan. which adversely affect current earning of bank. Difficulty in operating the functions of bank is another cause of NPA due to lack of money.  Payment which does not cover the interest and principal amount of that instalment. It will lose it‟s goodwill and brand image and credit which have negative impact to the people who are putting their money in the banks.  Irregularity of operations in the accounts.

 While monitoring the accounts it is found that partial amount is diverted to sister concern or parent company.  Stock statement not submitted on time.  External non-controllable factor like natural calamities in the city where borrower conduct his business. (3) Attitudinal Changes:  Avoidance of contact with bank.  Competition in the market. (2) Operational and Physical:  If information is received that the borrower has either initiated the process of winding up or are not doing the business.  Overdue receivables.  Death of borrower. Preventative Measurement for NPA  Early Recognition of the Problem  Identifying Borrowers with Genuine Intent 28 | P a g e . (4) Others:  Changes in Government policies.  Non-payment of wages.  Problem between partners.  Frequent changes in plan.

the bankers used the current ratio to judge the capacity of the borrowing business enterprises to repay the loan and make regular interest payments. Second it may be expressed in terms of percentage. Originally. Today it has assumed to be important tool that anybody connected with the business turns to ratio for measuring the financial strength and the earning capacity of the business. The Ratio is customarily expressed in three different ways. A ratio is just one number expressed in terms of another. Third. It may be expressed as a proportion between the two figures. it may be expressed in terms of rates.RATIO ANALYSIS The relationship between two related items of financial statements is known as ratio. 29 | P a g e . The use of ratio has become increasingly popular during the last few years only.

71 1.79 2504.78 1259.41 59963.53 2457.1.59 1665.67 53296.25 3.79 1.98 Commerece 13 14 15 16 17 18 19 20 Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of india Vijaya Bank IDBI Bank Total of 161.11 82599.7 42755.31 32738.94 1150.97 2316.71 1.64 75809.21 1.48 165147.85 1.32 1.22 620.21 1209.67 188306.91 1.91 86740.53 790.12 3090.64 3.59 3441.86 0.37 133588.17 3622.21 2.15 835.23 842.55 559.12 2009 59443.66 1468.05 98264.87 1372.05 35721. Gross NPA is the sum of all loan assets that are classified as NPA as per the RBI guidelines.47 1.24 155995.62 243998.38 1.81 84183.42 1920.02 2793.65 1.26 118272.74 1.21 1.61 93246.1 156098.39 2589.89 650.62 2.99 2.93 2470.91 1.98 995.07 1535601.99 458.94 2011 1646.34 30088.33 103087.97 Nationalized Banks 1 State Bank Of India Associates Of SBI 2 State Bank of Bikaner and Jaipur 3 State Bank of 486.63 103915.13 77568.87 2196.4 41743.78 2394.54 2.83 1.47 1.85 487.04 43937.82 1355.52 662444.43 2.76 490.79 2.81 0.9 41934.23 4356.64 2.46 1594.45 45163.96 1.02 131390.31 2.29 1.51 2.24 153022.97 106102.87 144731.72 2 16345.7 0.46 53933.19 2784.9 206.82 0.76 4.31 2.79 135193.92 56505.94 641.6 1173.45 171801.98 3.54 69064.24 720.77 1.15 163290.25 424.7 2981.71 2.12 29185.13 0.11 1.71 2.8 0.37 1.04 2767.16 47487.73 49222.69 26803.03 0.56 2. The ratio is to be counted in terms of percentage and the formula for GNPA is as follows: Gross NPA ratio = Gross NPA *100 Gross advances S no .02 87213.53 2.27 1.64 2786.27 48927.45 82495.53 23073.02 2663.28 139036.99 1.45 72154.82 1435.53 138583.86 1.36 51830.65 3.06 2.02 1.72 645.28 3.96 40926.14 1842.37 72587.67 1.39 35470.75 71509.89 2.14 2.48 30 | P a g e .95 1.1 611.47 96838.3 73025.35 1019.63 1.63 1.96 2.54 1539.41 2004.56 34817.38 1.04 69669.91 1.56 1.37 2.93 2.45 35874.77 459.64 549296.78 97534.75 0.8 1.85 35727.41 1058. GROSS NPA RATIO: Gross NPA Ratio is the ratio of gross NPA to gross advances of the Bank. Name of Bank Gross NPA Gross Advances Gross NPA Gross Advances Gross NPA Gross Advances Gross NPA to Gross Advances 2009 Nationalised Banks 1 2 3 4 5 6 7 8 9 10 11 12 Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of 1078.41 2167.81 17836.51 1923.45 2129.85 35563.67 1.71 0.3 544408.54 91585.56 698.59 1746400.5 2176966.15 3214.72 2010 1220.8 24698.53 2010 2011 1.45 65422.54 1.69 63629.39 42832.42 202724.4 44427.88 798.15 2.3 994.73 42907.25 368.06 4481.6 144844.28 4379.18 1923.

65%. Central bank of india.71 % & 2. Syndicate Bank also have higher gross NPA ratio with 2. We can see from the above table that the State bank of india has the higher gross NPA ratio of 2.65 %.Hyderabad 4 5 6 State Bank of Mysore State Bank of Patiala State Bank of 367. 0. Andhra Bank showed lower ratio with 0.14 1.98 % followed by the united bank of india with 2.61 573.51 2.31 18812.28 %. Whereas the Punjab & Sind bank . bank of Maharashtra also have higher gross NPA ratio with 2.58 595. 0. 2.76 % and 0.18 28140.21 % & 2.81 32971.68 835.88 43960. Indian overseas bank. High gross NPA ratio indicates the low credit portfolio of bank and vice-a-versa. High gross NPA ratio indicates the low credit portfolio of bank and vice-a-versa.89 47051.61 641.54% and 2.37 863.Andhra Bank.02 902837.49 2.55 1. Indian bank showed lower ratio with 0.9 21337.69 52330. We can see from the above table that the State Bank of india has the higher gross NPA ratio of 3.59 2.43 71047.67 1. Whereas the Punjab & Sind bank.8 56807.99 % and 0.31 % followed by the State bank of india with 3.99 % in the year 2011 31 | P a g e .89 % in the year 2009 GROSS NPA 2010 The table above indicates the quality of credit portfolio of the banks.63 %.85 %.02 2.26 1006.9 549.96%. We can see from the above table that the Bank of india has the higher gross NPA ratio of 3.28 2.23 34425.31 1.83 % and 0.42 1.41 3079804. Whereas the Corporation Bank . 0.98 29858. bank of Maharashtra also have higher gross NPA ratio with 3.12 Sector Banks GROSS NPA 2009 The table above indicates the quality of credit portfolio of the banks.67 %.29%. Punjab & Sind bank showed lower ratio with 0.8 Travancore Total of 5 Associates of SBI Total of State Bank Group Total Of Public 45616.99 2.35 2261726.91 %.67 748981.2 2. High gross NPA ratio indicates the low credit portfolio of bank and vice-a-versa. Indian Bank.98 2495381.31 %.55 726124. United Bank of India.61 46470. Indian Bank.74 1381.02 25869.64 1.3 38802.48 % followed by the UCO Bank with 3.86 % in the year 2010 GROSS NPA 2011 The table above indicates the quality of credit portfolio of the banks.65 2. Indian Overseas Bank .85 3.

34 486.98 995.07 1535601.93 1.37 0.26 118272.49 377.77 1.5 1.5 165147.44 0.66 1468.42 1920.18 2.22 244.3 73025.45 35874.3 994.8 56807.7 2981. Name of Bank Gross Gross Gross Gross NPA Provision Advances Gross NPA Provision Advances Gross NPA Provision Advances Net NPA to Net Advances 2009 2010 1.26 1006.31 17836.81 30088.74 2000.4 44427.67 2870 748981.58 1220.77 459.3 1381.88 43960.92 2.21 1209.89 650.33 0.98 2009-2010 313 170 269 623 187 900 322 170 199 14 366 171 63 821 447 268 546 199 134 144 6326 2475 73 135 54 73 59 71509.61 641.75 206.37 133588.59 1.78 2394.92 1.09 345.9 0.64 2786.93 2470.87 144731.67 2.88 798.39 2589.44 3079804 2.61 46470.39 0.25 86.79 105.95 0.45 171801.85 487.87 2196.23 1.31 875 289.7 63629.61 573.41 16981.17 3622.24 720.37 835.39 2.02 2793.25 1.12 3090.63 103915.74 47051.38 3.99 1.06 123 264 349.67 2.53 0.06 4481.55 45616.67 188306.22 620.04 2.24 155995.54 1.95 1.5 53933.17 2261726.37 72587.59 1665.23 4356.69 1.52 1.54 424.21 0.31 1.83 1.67 2.8 135194 40926.37 1.02 2663.11 2.18 1923.77 32 | P a g e . NET NPA RATIO The net NPA percentage is the ratio of net NPA to net advances.27 48927.67 34425.36 0.33 103087.96 1.78 1259.46 1594.94 0.52 0.05 35721.94 902837.5 96838.39 35470.64 75809.44 -189.91 65422.41 59963.19 1.53 2457.81 32971.52 2010-2011 830 305 901 1754 251 1426 288 345 97 392 919 532 92 994 531 354 699 273 474 236 11694 4622 142 138 86 219 81 91585.53 790.12 29185.55 98.79 2504.37 1.59 3441.41 370.2 28140.56 698.28 59443.8 1.14 1842.25 368.94 75.2 47487.41 2004.6 144844.35 1019.55 2.12 2.51 76.2.02 1.04 367.91 86740.98 1.02 1.89 863.1 156098.94 1150.91 42832.57 726124.19 2784.69 26803.44 2.55 559.45 29858.81 1.8 16345.15 3214.52 2495381 71047.13 77568.48 2.23 2.45 2129.96 1.94 641. The formula for that is: Net NPA Ratio = Gross NPA-Provision * 100 Gross advances-Provision S no.23 842.9 549.67 1.28 139036.25 1.64 1.59 1.15 163291 106102.45 72154.42 202724 131390 87213.51 1.05 0.56 133.97 0.1 82599.64 490.9 21337.1 43937.82 1.5 1646.68 38802.62 243998.8 97534.05 98264.51 2011 0.69 52330.39 23073.56 34817.02 5287.67 1.55 0.3 611.48 1.99 458.54 1539.98 9195.61 0.23 1.73 42907.35 2.51 1923.5 4876.12 0.6 1173.35 268.61 0.73 49222.04 69669.45 1.67 1.6 1746400 544408.45 82495.87 1372.28 4379.54 69064.61 93246.63 Nationalised Banks 1 Allahabad Bank 2 Andhra Bank 3 Bank of Baroda 4 Bank of India 5 Bank of Maharashtra 6 Canara Bank 7 Central Bank of India 8 Corporation Bank 9 Dena Bank 10 Indian Bank 11 Indian Overseas Bank 12 Oriental Bank of Commerece 13 Punjab and Sind Bank 14 Punjab National Bank 15 Syndicate Bank 16 UCO Bank 17 Union Bank of India 18 United Bank of india 19 Vijaya Bank 20 IDBI Bank Total of Nationalized Banks 1 State Bank Of India Associates Of SBI 2 State Bank of Bikaner and Jaipur 3 State Bank of Hyderabad 4 State Bank of Mysore 5 State Bank of Patiala 6 State Bank of Travancore Total of 5 Associates of SBI Total of State Bank Group Total Of Public Sector Banks 2008-2009 1078.81 84183.94 32738.69 2.26 2.72 24698.66 435.91 -3050 21.12 161.55 35563.72 25869.97 2316.83 1.62 2.78 1.82 1435.38 1.85 645.41 2167.1 41743.1 1.98 697.45 45163.89 0.8 1.9 41934. The provision is to be made for NPA account.23 -769.7 42755.92 56505.07 585.7 1.24 153022.99 100.5 2176967 662444.85 35727.58 125.58 5645.36 51830.61 1.65 0.15 835.35 1.02 18812.05 2.56 0.82 1355.9 549296.8 1.53 138583.4 53296.41 1058.55 1. in which the provision is to be deducted from the gross advance.04 2767.5 65.67 595.

Indian Bank has showed the lowest NPA ratio 0 .51% in 2010-11 33 | P a g e . High NPA ratio indicates the high quantity of risky assets in the Banks for which no provision are made.85 % followed by the Indian overseas Bank with 2. Indian Overseas bank has the highest NPA ratio of 3.39% in 2008-09 NET NPA 2009-10 This ratio indicates the degree of risk in the portfolio of the banks.33% in 2009-10 NET NPA 2010-11 This ratio indicates the degree of risk in the portfolio of the banks.83 %.5 % followed by the State Bank of India with 2. Indian UCO bank has the highest NPA ratio of 2. High NPA ratio indicates the high quantity of risky assets in the Banks for which no provision are made. High NPA ratio indicates the high quantity of risky assets in the Banks for which no provision are made.45% and Corporation bank have also showed lower NPA ratio 0.NET NPA 2008-09 This ratio indicates the degree of risk in the portfolio of the banks. From the table it becomes clear that the NPA ratio of some banks have been improved quite well as compared to the previous year and some banksneeds to be improve .Indian Bank has showed the lowest NPA ratio 0 .11% and Andhra Bank have also showed lower NPA ratio 0. From the table it becomes clear that the NPA ratio of most of the banks ration has been increased from previous years that means banks are performing well . State Bank of India has the highest NPA ratio of 2.21% and Punjab & sind Bank have also showed lower NPA ratio 0.95 % followed by the State Bank of India with 2.8 %.38 %.Indian Bank has showed the lowest NPA ratio 0 .

Provision Ratio= Total Provision *100 Gross NPAs 34 | P a g e . & it directly affect on the gross profit of the Banks.3. The formula for that is. The provision Ratio is nothing but total provision held for NPA to gross NPA of the Banks. PROVISION RATIO Provisions are to be made for to keep safety against the NPA.

41 30.04 65.79 2504.9 15.53 288 790.88 12 20.51 370.31 17836.98 4 Bank of India 2470.98 9318.71 16.02 2663.53 76.55 22.42 919 1920.41 16981.06 8 Corporation Bank 559.8 5.48 21.44 10.35 47.24 97 720.15 3214.73 236 42907.12 31.82 699 1355.23 901 4356.8 23.14 98.13 6.78 273 1259.91 26.52 4622 835.45 863.25 20.58 11 Indian Overseas Bank 1923.65 32.487 27.7 20.4 23.77 264 10 Indian Bank 459.88 9.22 10.06 4481.94 56807.04 -305 4 State Bank of Mysore 367. Name of Bank Gross NPA Provision Gross NPA Provision Gross NPA Provision Provision Ratio 2009 24.98 830 995.62 11.23 13.45 19.87 10.79 16.45 18.58 Total of Nationalized Banks 26803.75 206.02 5287.49 14 Punjab National Bank 2767.87 12.46 377.46 32.31 6 Canara Bank 2167.67 8.26 1006.99 11.83 12.38 19.81 40.18 2010 25.7 251 2981.19 474 2784.28 Total of 5 Associates of SBI Total of State Bank Group 18812.74 1 State Bank Of India 16345.66 34.41 86.51 14.97 875 7 Central Bank of India 2316.11 37.95 9.522 -17.54 345.78 1426 2394.39 11694 23073.07 29.66 1468.29 20.85 645.17 354 3622.39 35470.47 35.9 35 | P a g e .03 16.64 305 2786.33 40.03 14.21 1209.02 105.94 641.44 12 Oriental Bank of Commerece 1058.06 12.85 487.66 28.91 3 State Bank of Hyderabad 486.304 21.56 20 IDBI Bank 1435.67 2870 28140.41 2004.86 71047.12 -189.5 13.24 15.3 16.63 21.9 76.28 92 4379.07 17 Union Bank of India 1923.55 2 Andhra Bank 368.25 5 Bank of Maharashtra 798.23 345 842.35 585.43 Total Of Public Sector Banks 45616.87 1372.59 1665.79 6 State Bank of Travancore 549.8 5645.6 1754 1173.34 75.301 9.5 6.67 595.12 531 3090.68 835.986 15.48 -62.59 3441.642 2008-2009 Nationalised Banks 1 Allahabad Bank 1078.17 2009-2010 1220.27 21.51 5 State Bank of Patiala 573.48 54.5 13 Punjab and Sind Bank 161.93 13.41 125.87 9.S no.18 13.3 611.68 21.61 641.099 7.11 26.99 19 Vijaya Bank 698.751 18.49 11.49 13.88 697.02 392 2793.56 244.69 133.25 268.66 24.22 18 United Bank of india 1019.04 30.48 25.99 458.69 11.151 2011 50.89 650.36 12.12 20.55 289.66 3 Bank of Baroda 1842.851 13.94 Associates Of SBI 2 State Bank of Bikaner and Jaipur 490.35 7621.87 2196.09 15 Syndicate Bank 1594.41 16 UCO Bank 1539.92 27.53 2457.54 532 424.9 40.98 313 170 269 623 187 900 322 170 199 137 366 171 63 821 447 268 546 199 134 144 6449 2475 73 135 54 73 59 2010-2011 1646.99 42.74 1381.39 994 2589.66 22.23 142 138 86 219 81 21337.04 43.93 435.55 1975.67 13.45 2129.43 24.3 994.82 100.18 349.22 123 9 Dena Bank 620.61 30.64 2000.39 9.4 1150.61 21.

If the provision ratio is less. The lowest provision ratio is showed by state bank of Travancore 9.53 %. it indicates that the Banks has made under provision. The lowest provision ratio is showed by oriental bank of commerce with -17. Dividend and safety of shareholders‟ fund. It has direct bearing on the profitability.75 % and in the year 2009-10 PROVISION RATIO 2010-11 This Ratio indicates the degree of safety measures adopted by the Banks. The highest provision ratio is showed by Indian Bank with 76. The highest provision ratio is showed by Indian bank with 54.46 % followed by Allahabad Bank with 50. PROVISION RATIO 2009-10 This Ratio indicates the degree of safety measures adopted by the Banks.PROVISION RATIO 2008-09 This Ratio indicates the degree of safety measures adopted by the Banks. If the provision ratio is less.13 % followed by Dena Bank with 42. it indicates that the Banks has made under provision. It has direct bearing on the profitability.41 %.93 % followed by Andhra Bank with 34. Dividend and safety of shareholders‟ fund. it indicates that the Banks has made under provision. It has direct bearing on the profitability.9 % and in the year 2008-09. The highest provision ratio is showed by Canara bank with 35. The lowest provision ratio is showed by IDBI bank 6. If the provision ratio is less.87 %.642 % and in the year 2010-11 36 | P a g e . Dividend and safety of shareholders‟ fund.

81041 1.04 367.12909 0. The formula for that is: Problem Asset Ratio = Total Assets * 100 Gross NPA S no.076.78.75 206.98703 1.79 1.966.900.83276 1.02 2.73 2.4 23073.05.572.25 70976.78 2394.08229 1.51 1923.13 37.62 1.55 559.54 1539. 1.501.189.918.82435 1.343.73 42907.43 1.41 2167.4 115.64 1.97 59454.58.02 2663.919.59 1665.01.41 1058.9 549.16 1.68 88.62529 1.34 486.97 2316.657.76.87276 1.17677 1.7 3.88723 1.00317 0.648.4.91 18.52 2.74.6 1173.975.34552 0.22 70.53541 0.18 1923.58 1.54966 62.41615 0.12 12.17 10.50852 1.01 30.442.10422 0.386.133.74 1.14 3.645.050.36 1.36 2.53519 1.96.3 2009-2010 1.538.69977 1.93986 0.94603 1.06872 0.54002 0.655.54 424.172.516.53 790.06 4481.80 48.39491 1.47.59155 1.02 45408.508.38 68.44 90.14157 77.82 1435.8 52032.60.30 13.87 1372.46 1594.96 51.52 84.812.10 27104.53.44162 1.21.37 21.78 1259.63351 0.32 1.690.09 1.121.32 1.78905 1.53 2457.74 1220.56 698.80498 1.23 4356.1208 1.98 3.82.19 2784.22 620.21252 1.08865 0.80 36.43.325.64 2009-2010 1.5 2008-09 1.67 56.42 2.69485 2009-10 1.39.09573 1.09905 1.807.45 2129.31 17836.37.12.66 1.008.36495 1.07822 1.671.80 1.85.778.757.85 645.56.58 2.64337 1.94 641.93 2470.82.376.011.342.838.33.61 573.67 595.65398 1.63 2.02 2793.53767 0.17 3622.78.12022 0.58 40.62973 0.41 2004.21.53 81.55 45.61 641.431.23 4.664.93 76.87 2196.96.655.316.36.466.469.30.31 1.7 2981.53 49460.073.59 70.64.24 720.61893 1.40 1.82 1355.664.15757 1.599.718.722.58863 0.370.77.031.39 35470.91426 0.14 1842.77 459.337.040.22416 1.32699 1.64348 1.25.46 490.460.42 1920.6 70012 1.59 3441.58293 1.19034 0.789.550.699.31089 1.15 3214.23.3 994.63.402.05 12. PROBLEM ASSET RATIO It is the ratio of gross NPA to total asset of the bank.73 3.25 368.08.954.784.69 26803.286.08 835.045 863.69319 1 46.28 4379.21 3.45231 2.56889 0.07978 1.501.529.37.79 2.64 2786.53.79 69618.01.56245 1.736.667.55065 1.28.08 1078.79 2504.3787 1.74 1381.16087 1.255.76 15.97.12 3090.36381 1.68 835.99 458.94 1.00 56.21 611.8855 Nationalised Banks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerece Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of india Vijaya Bank IDBI Bank Total of Nationalized Banks State Bank Of India Associates Of SBI 2 3 4 5 6 State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore Total of 5 Associates of SBI Total of State Bank Group Total Of Public Sector Banks 2008-2009 97.34696 37 | P a g e .75 2.21 1209.79 1.382.05745 0.88 798.91166 1.50 10669.11.24059 1.47 1.66 1468.616.09 2.54585 1.25 1.55 76.17118 1.984.32315 1.21 76.88 2.389.70259 0.096.582.39 2589.23.77741 1.19481 1.406.26 1006.67 1.905.432.75 59.24 86.28098 0.45 2.18896 0.76 2.21 2.930.586.50574 1.64.71 2.919.54141 1.72 62.78195 1.11483 0.908 0.28947 1.04 44.33.22197 1.78.85 487.51 62.030.413.35 1019.61.21 90.30 57.161.8 16345.632.11.33 24.35254 0.18 3.055.23 842.33 9.35 54.089.00 40485.89 650.72.31.08363 1.397.12 161.04 2767.73051 1.46 81286.741.21.398.00 68.27 1.319.20 1646. Name of Bank Total assets Gross NPA Total assets Gross NPA Total assets Gross NPA problem asset ratio 201011 1.89119 1.45045 1.46 71.61 1.98 995.40 1.27.

89% and 1.62% and 1.69% and 1. from the above table it becomes clear that Indian overseas bank and United Bank of india have the high ratio of 2. which means high liquid. from the above table it becomes clear that UCO Bank and Syndicate Bank have the high ratio of 1. from the above table it becomes clear that State bank of India and United Bank of india have the high ratio of 1. High problem asset ratio.thts ratio implies that the both above banks have the liquid assets through which they will be able to repay their liabilities of deposits quickly as compared to other banks in year 2009-10 PROBLEM ASSET RATIO 2010-11 It has been direct bearing on return on assets as well as liquidity risk management of the bank.thts ratio implies that the both above banks have the liquid assets through which they will be able to repay their liabilities of deposits quickly as compared to other banks in year 2008-09 PROBLEM ASSET RATIO 2009-10 It has been direct bearing on return on assets as well as liquidity risk management of the bank. which means high liquid.78%. which means high liquid.69%.thts ratio implies that the both above banks have the liquid assets through which they will be able to repay their liabilities of deposits quickly as compared to other banks in year 2010-11 38 | P a g e . High problem asset ratio.PROBLEM ASSET RATIO 2008-09 It has been direct bearing on return on assets as well as liquidity risk management of the bank.92%. High problem asset ratio.

22 NA 14.02 NA NA NA 12.56 14.36 12.52 11.25 14. Capital Adequacy Ratio = Capital * 100 Risk Weighted Assets S no.60 2010-11 13.39 13.27 13.77 12.05 12.53 12.50 11.24 11.62 13.94 13.23 15.42 13.71 14.57 14.25 13. which are weighted/adjusted according to risk attached to them i.43 12.46 11.98 NA NA 13.e.11 11. CAPITAL ADEQUACY RATIO Capital Adequacy Ratio can be defined as ratio of the capital of the Bank.99 12. Name of Bank capital adequacy ratio 2008-09 2009-10 13.78 13.78 12.80 13.10 13.51 12.82 NA 11.99 13.51 11.73 13.28 11.93 14.98 NA 13.10 14.21 12.97 11.26 39 | P a g e Nationalised Banks 1 Allahabad Bank 2 Andhra Bank 3 Bank of Baroda 4 Bank of India 5 Bank of Maharashtra 6 Canara Bank 7 Central Bank of India 8 Corporation Bank 9 Dena Bank 10 Indian Bank 11 Indian Overseas Bank Oriental Bank of 12 Commerece 13 Punjab and Sind Bank 14 Punjab National Bank 15 Syndicate Bank 16 UCO Bank 17 Union Bank of India 18 United Bank of india 19 Vijaya Bank 20 IDBI Bank 1 State Bank Of India Associates Of SBI 2 3 4 5 State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala .04 12.31 13.94 12.70 12.05 NA 14.15 11.90 12.61 NA 12.03 12.12 9.93 13.54 13.35 14.39 13. to its assets.5.01 12.07 NA 13.2 NA 12.30 14.16 12.68 13.37 12.

Revenue capital reserves (excluding revolution reserve) and other undisclosed reserves LESS accumulated losses till the current year.98% but dropped in 2009 & than again it increased in 2010.97 It indicates scope of up gradation/improvement in NPA. Privately placed Bonds. other intangible assets.98 34. Substandard Assets Ratio= total substandard assets *100 Gross NPAs The ratios calculated below are for the entire public sector banks: Rs in crore 2010 27688 71047 year Substandard Assets Gross NPA Calculation of Ratio 2008 16870 2009 19521 56808 45616 36. Hybrid capital. Investment Fluctuation Reserve. which means there is a need of advance up gradation.SUB-STANDARD ASSETS RATIO It is the ratio of Total Substandard Assets to Gross NPA of the bank.37% followed by the State Bank of Hyderabad and Indian Overseas Bank having ratios of 14.90%and 14. As far as this ratio is concerned the Corporation Bank has shown much appreciated result by acquiring the ratio of 15. 40 | P a g e . Tire-II: Property Revaluation discounted .70% in 2011 Tire-I: Paid up capital.74 The capital adequacy ratio is important for the to maintain as per the banking regulations. which indicates that there is a high scope for advance up gradation or improvement because it will be very easy to recover the loan as minimum duration of default.Subordinate Assets. Statutory Reserve. Higher substandard asset ratio means that in whole NPA the sub standard ratio has major proportion. provisions on standard assets.363 38.6 State Bank of Travancore 13. In 2008 this ratio of Public Sector bank was 36.03 13.53 14. & Capital should not exceed Tire-I 6. investment in subsidiaries.

2003.Satish Kumar(2005)”Non Performing Assets in Indian banks” Das. RBI Occasional Papers. Parricha.crisil. Mohit Kakkar (2008 -2010)” COMPARATIVE ANALYSIS ON NON PERFORMING ASSETS OF CANARA BANK AND PUBLIC SECTOR BANKS” Goyal kanika(2010)Empirical study of non performing assets management of Indian public sector banks” Asia Pacific Journal of Research in Business Management Year : 2010. The Indian Journal of Commerce. Anoop Bhatia and Saurabh Mishra(2007)” Non-Performing Assets of Indian Public. Non-Performing Loans and Terms of Credit of Public Sector Banks in India: An Empirical Assessment. vol.C. issue 3. Private and Foreign Sector Banks: An Empirical Assessment” The IUP Journal of Bank Management. VI. No. 2004.117.19 Mukherjee. (2003) Dealing with NPA’s: Lessons from International Experiences. Chugh (2005). P.202/Arcil1/knowledge_centre/publications/papers/ Research Journal of Social Sciences. S. Vol. Misra(2003)” Pro-cyclical Management of Banks’ Non-Performing Loans by the Indian Public Sector Banks” http://www. S. Are Non-performing Assets Gloomy or Greedy from Indian Harpreet and J.” A comparative study of non performing assets in india in global context”http://www. Vasuki. 24(3):81-121. Management of NPAs of Public Sector Banks. Volume : 1 41 | P a g e .IV.pdf R. K. 4-12. & Saravanan.K (2005): ‘Risk Modelling – A Markovian Approach’. 3.nishithdesai.08. 57(2):14-21.REFERENCES Prshant k reddy (2002).." Gourav Vallabh. (2008).pdf K. M. pp 22-27. S & Bose. " Indian baking today-Impact of Reforms" Harpreet (2006) “Credit management and problem of NPAs in Public Sector Banks” Kumar (2006) "Banking Sector Efficiency in Globalize Economy. pages 7-28 Karunakar. The Alternative.PDF Desai(2002) “Distressed Asset Management: A Reality Checkhttp://www. Dhal. Ranjan and S.1. pp.115.bis. Khasnobis(2005)”NPAEmergingChallenge” http://203. 2007. March 2005.pdf 42 | P a g e .BIBLOGRAPHY www. www.

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