NON-PERFORMING ASSETS IN INDIAN BANKING SECTOR:

AN ANALYTICAL AND COMPARATIVE STUDY BETWEEN PUBLIC

AND PRIVATE SECTOR BANKS

In fulfilment of the Dissertation

In Semester – IV of the Master of Business Administration

Prepared By:
Sunny Garg
Registration No: 17010121050

Under the Guidance of Dr. Abdul Hameed

1
 Master of Business Administration

Declaration

This is to declare that the report entitled “Non-Performing Assets in Indian Banking Sector: An
Analytical and Comparative Study between Public and Private Sector Banks” is prepared for
the partial fulfilment of the Dissertation course in Semester IV of the Master of Business
Administration by me under the guidance of Dr. Abdul Hameed.

I confirm that this dissertation truly represents my work. This work is not a replication of work
done previously by any other person. I also confirm that the contents of the report and the views
contained therein have been discussed and deliberated with the faculty guide.

Signature of the Student:

Name of the Student: Sunny Garg

Registration No: 17010121050

2
 Master of Business Administration

Certificate

This is to certify that Mr. Sunny Garg, Regn. No. 17010121050 has completed the dissertation
titled Non-Performing Assets in Indian Banking Sector: An Analytical and Comparative Study
between Public and Private Sector Banks under my guidance for the partial fulfilment of the
Dissertation course in Semester IV of the Master of Business Administration.

Signature of Faculty Guide:

Name of the Faculty Guide: Dr. Abdul Hameed

3
 ACKNOWLEDGEMENT

I am using this opportunity to express my gratitude to everyone who supported me throughout

the course of this MBA project. I am thankful for their aspiring guidance, invaluably
constructive criticism and friendly advice during the project work. I am sincerely grateful to
them for sharing their truthful and illuminating views on a number of issues related to the
project.

I express my warm thanks to my faculty guide Dr. Abdul Hameed for his support and guidance
at Alliance School of Business, Alliance University.

I would also like to thank all the people who provided me with the facilities being required and
conductive conditions for my MBA project.

Thank you,

Sunny Garg

4
 INDEX

S.NO. PARTICULARS PAGE NO.

1 Preamble 6

2 Chapterization 7

3 Chapter 1: Introduction 8

4 Chapter 2: Review of Literature 15

5 Chapter 3: Research Methodology 21

6 Chapter 4: Results and Discussions 22

7 Chapter 5: Conclusions 45

8 Literature Cited (References) 46

5
 1. Preamble:

The Indian banking sector has been facing a very serious problem for a very long period
because of rising non-performing assets. Non-performing assets are those assets which stop
generating income for the bank.

The current dissertation deals with the issue of non-performing asset in banking sector and its
analytical and comparative analysis and also evaluates the performance of both public and
private sector banks. This dissertation uses secondary data to evaluate the performance of both
public and sector banks in view of rising NPAs. For this dissertation, following 4 banks have
been considered:

Public Sector Banks:

1. State Bank of India’
2. Punjab National Bank
Private Sector Banks:
1. ICICI Bank
2. Axis Bank

This dissertation further seeks to analyse the reasons and causes for increasing NPAs in the
banking sector and to suggest suitable measures to combat the issue of rising NPAs.

6
 2. Chapterization

In order to facilitate the reader and effective flow of work carried out, an organizational outline
of the dissertation is presented here below:

Chapter 1 talks about the introduction of the dissertation and defines the dissertation title, lays
down the definition and explains the major problems and the objectives of the dissertation. It
also justifies and highlights the problem posed, define the topic and explain the aim and scope
of the work presented in the report.

Chapter 2 lays the literature review in the area of non-performing assets in commercial banks,
and talks about the reasons behind the NPAs, and there are literatures which discusses the
effective methods to decrease the effect of NPA and for their effective handling. It presents a
critical appraisal of the previous work published in academic literature pertaining to the topic
of the study.

Chapter 3 presents research methodology, which includes sources of data, study of

methodology, and the techniques of data collection and analysis and includes the representative
data in table and figures in this chapter.

Chapter 4 presents the results and discussions of the report. This chapter includes a thorough
evaluation of the study carried out and bring out the contributions from the study.

Chapter 5 is the final chapter of the report. This chapter includes the brief report of the work
carried out in this report and includes conclusions derived from the logical analysis presented
in the results and discussions. It also includes suggestions and scope for future work.

Table includes detailed information and lengthy derivations.

Literatures Cited presents the references, from wherever, this project has been referred from
and APA style of convention has been used to cite the references.

7
Chapter 1: Introduction:

The Indian banking system consists of commercial and cooperatives banks, out of which
commercial banks account for almost 90 percent of the total banking system’s assets.
Commercial banks play a very important role in banking system in India and is a very important
part of a banking system irrespective of any country. A commercial bank is a profit oriented
financial institution that accepts deposits from the public and offers loan to the public.
Commercial banks can either be public banks, private banks or foreign banks.

Till 1991, there was no concern for asset quality in Indian banking system, the whole focused
was on wide number of branches and to increase the employment generation. It was in the year
1991, when former RBI Governor Mr. M Narasimham was appointed to review the banking
system to unleash the potential of banking system in India in terms of increased banking
efficiency and improvised customer services. The primary function of any bank is to deposit
funds and to grant loans to varied sectors like personal loans, housing loans, agricultural and
industrial loans. But in the recent years, the increasing non-performing assets have been a very
major concern for the banking sector due to which banks have become very vigilant and
stringent in extending loans.

The concept of non-performing asset in banking system is only limited to loans. When a loan
asset ceases to generate income (EMI, interest, or any other dues) for bank for more than 90
days, then that loan asset is declared to be an NPA. As per a report of Reserve Bank of India,
the gross nonperforming assets in Indian banks is estimated at around Rs. 440,000 crore, out
of which 90 percent of the NPA is accounted by the public sector banks. Narasimham
Committee was the first ever committee that made it compulsory to identify and reduce the
NPA and to treat this issue as a concern of national priority. Due to NPA, banks face credit risk
and also become inefficient in allocating resources.

If we look at the numbers of NPA over the period of 25 years, we would find that in the year
1995, the NPAs in public sector banks were around Rs. 38,385 crore and which increased to
around Rs. 71047 crore in the year 2011, and currently it is around Rs. 400,000 crore. And in
private sector banks, the NPAs in the year 2001 was about Rs. 6410 crores, which increased to
Rs. 17,972 crore in the year 2011 and as of now, it is around 44,000 crore rupees. Profitability

8
and the revenues of the banks are badly impacted by the default in the payment of the loan
assets which leads to the creation of NPAs.

Banks play a very important role in any economy. Banks function to mobilize the funds of the
people and to disburse funds according to the priorities of the society and the economy. Thus,
it is very important that a bank should manage its credit in an efficient manner and should
recover the disbursed loan assets effectively so that it doesn’t lead to NPAs.

This dissertation deals with the problem of non-performing assets. A non-performing asset is
defined as an asset that ceases to generate incomes to the banks for more than 90 days. This
paper also discusses the financial performance of the public and private sector banks with
respect to NPAs and tries to find the suggestive measures to keep a control on the increasing
NPA in the banking sector in India.

This dissertation has been done to achieve the following objectives:

1. To comprehend the financial performance of the public and private sector banks of India
during the last 10 years.
2. To study the impact of NPAs on banking system.
3. To compare the proportion of Non-Performing assets in the public and private sector banks.
4. To study the reasons behind the occurrence and growing trend of NPAs in the both public
and private sector banks.
5. To examine the recovery methods and policies being used by these banks to reduce the load
of increasing NPAs in the banking sector.
6. To address the suggestive measures for the banks to efficiently and effectively handle and
reduce the hindrances caused by the NPAs to the banking system in India.

1. Non-Performing Assets (NPAs)

Today NPAs are the matter of utmost concern in the banking sector or other financial
institutions in India. Whenever a loan amount which doesn’t meet the laid payment criteria of
interest amount of EMI (Equated Monthly) payments are known as non-performing assets.
NPAs can be further seen as commercial and consumer loans. Commercial loans become NPA
when they are overdue for more than 90 days, whereas consumer loans become NPA when

9
they are due for more than 180 days. Recently, there have been various cases by big corporate
houses which are pending with the Indian Banks. Bhushan Steel is one such example who
defaulted on an amount of Rs. 56,022 crore, out of which only 63.5% (= Rs. 35,571 crore) has
been realised so far.

2. Meaning of Non-Performing Assets

Meaning of Non-Performing Assets (NPAs) has been well defined by RBI. RBI (Reserve Bank
of India) is the central bank of India. Now, as per RBI, a non-performing asset is:

- An asset, that also includes leased asset when it stops accumulating income for the
banks or financial institutions.
- A NPA is a loan or advance where:
o Any interest or instalment of the principal amount remains overdue for a period
longer than 90 days in case of a term loan.
o The bill, in case of bills purchased and discounted, remains overdue for a period
of more than 90 days.
o The instalment of principal or interest thereon remains overdue for two crop
seasons for short duration crops, the instalment of principal or interest thereon
remains overdue for one crop season for long duration crops.
o The instalment of principal or interest thereon remains overdue for one crop
season for long duration crops.
o The amount of liquidity facility remains outstanding for more than 90 days, in
respect of a securitisation transaction undertaken in terms of guidelines on
securitisation dated February 1, 2006.
o In respect of derivative transactions, the overdue receivables representing
positive mark-to-market value of a derivative contract, if these remain unpaid
for a period of 90 days from the specified due date for payment.

10
3. Kinds of NPA

There are 2 kinds of NPA:

3.1. Gross NPA

Gross NPA is the overall quantitative amount of all those loans that have gone bad
debts. It is an advance which is written off, for which bank has made provisions, and is
still in bank’s book of accounts.

Gross NPAs Ratio = Gross NPAs / Gross Advances

3.2. Net NPA

Those NPAs in which, the banks have deducted the provisions regarding NPAs from
the Gross NPAs are known as Net NPAs.

Net NPA = Gross NPA - Provisions

4. Assets Classification

Assets can be classified into 3 types:

4.1. Standard Assets

Those assets which are not facing any problem and are not pf more risk towards the
customer are known as standard assets. These standard assets are considered as
performing assets. A general provision of 0.25% is must to be provided on basis of
global loan portfolio.

4.2. Sub-Standard Assets

11
 Any asset which is remained NPA for a period less than or equal to 12 months is
classified as sub-standard asset. A general provision of 10% on outstanding has to be
provided on sub-standard assets.

4.3. Doubtful Assets

Those assets which have remained NPAs for a period exceeding 12 months and which
are not loss advance. As per RBI, it is must for banks to facilitate 100% of unsecured
amount of pending loan.

5. Reasons behind NPAs

There are several reasons for a loan asset account becoming a non-performing asset. It is very
important for a banking sector to flourish, otherwise it directly impacts the economy and the
financial power of the country. The increasing non-performance assets are nothing but failure
of the banking sector which also indirectly affects the other sectors. Earlier, the Indian banking
sector was being operated in a closed economy but since when it has been open to the economy,
it has faced various challenges.

The increasing NPAs is the net result of this situation and which costs the banks so much and
finally it leads to the higher cost of the banking services. One of the main reasons behind the
increasing NPAs is the prescribed percentage of credit of the banking sector to the priority
sectors. And this percentage is too high, i.e., 40 percent. Indian banking sector doesn’t faces
lack of stringent norms but rather they face various legal impediments and time consuming
asset disposal process.

This NPA problem is not new, and has been existing for more than decades. It was year 1989-
1990, when the Prime Minister VP Singh at that time, had given a huge waiver of Rs. 15,000
crore for the rural loan accounts, this didn’t help much, but this left a very negative impact in
the payer and the borrower, as after that the payer didn’t use to feel obliged to pay their debts,
and this negatively affected the Indian Banking Sector.

12
There are two factors for a loan account becoming a non-performing assets, internal factor and
external factor. Internal factors are related to the funds and the borrower like when the funds
borrowed for any particular purpose is not used for that purpose or when that purpose or project
is not completed within the stipulated time. This creates the situation of non-payment of loan
assets. Apart from this, business failures and diversions of funds for doing other things also
causes the situation of NPAs. Well, all these situations occur because of the borrower and their
projects. Also, wilful defaults, siphoning of the borrowed funds, frauds, loan disputes and
misappropriation are the additional reasons. On the other hand, internal factors also include the
deficiency on the side of the banks, when the banks fail to monitor the loan assets, and delay
in follow-ups with the borrower for settlement of the loan accounts.

External factors are other factors that are due to policies, environmental, legal and social
factors. Sluggish legal system is one of the major external factors as there are never ending
disputes and lack in sincere efforts by the legal system to settle the disputes. And the
government policies like excise and import duties affect the banking sector. Also, the industrial
recession and shortage of raw materials, power and other resources are the major reasons for
the increasing NPAs.

6. Impact of NPA

The increasing non-performing assets in the Indian banking sector, not only minimises the
profitability of the banks but also impacts the credibility of the banks. These massive amount
of increasing non-performing assets in the commercial banks is eroding the maximum of the
capital base of the public sector banks. If the banks start making losses, it starts destabilising
the confidence of the customers (depositors) of the banks. And if the depositors lose confidence
in their banks, they will start withdrawing their money from the banks, which would lead to
the collapse of the banking system. This is why it is very important that non-performing assets
must always remain within the minimum limit so that the sustainability and stability of the
banks doesn’t get disturbed.

This is not the only impact NPAs causes. Also when NPAs increase, it forces banks to decrease
the interest rates on the saving deposit accounts to increase the margin of profitability of the
banks. NPAs cause long term threats to the banking sectors with respect to its stability.
Recently after demonetisation, it was noted that the profitability of the manufacturing sector

13
reduced, which prompted the banks to stop the credit growth of the industrial sector. The
shortage of funds due to NPAs affected the growth of the industrial sector. This continuous
reduction of availability of credit is not only harmful for the industrial sector, but also for
overall economy.

Increasing NPAs lead to the shrinking of availability of credit to the public, and hence the funds
are not available to the public at large and mainly for priority sectors, which in turn halts the
growth of the economy and industrial sector. Only when credit is available to the public in
excess through banks, then only new entrepreneurs could establish new companies, which in
turn would generate employment and will lead to a better and robust economy. Hence, it is
very important that banking sectors be stabilised and NPAs should be controlled through its
effective management.

14
Chapter 2: Review of Literature:

Gopika Gopakumar. Jet Airways classified as NPA in Q4, Gopika Gopakumar. This article
is about declaring Jet Airways as NPA in Q4 by ICICI Bank Ltd, which also led to decline in
the share of ICICI Bank. According to this article, bank have made sufficient provisions against
the debt of Jet Airways. Bank have classified the fund based exposure of Rs.276 Crore towards
IL&FS as NPA and made a provision of Rs.146 Crore.

Sachin Dave. ICICI Bank to ire forensic auditor to probe into NPA irregularities, in this
article, ICICI Bank have decided to appoint a forensic auditor to probe allegations against bank
for irregularities in 31 loan accounts. Such appointment is due to the pressure from SEC (US
Securities and Exchange Commission) on bank. An anonymous ICICI Bank employee reported
such irregularities in the operations of bank.

Reuters. SBI to auction NPA assets worth Rs.6,169 crore in March, State Bank of India
decided to auction non-performing assets worth Rs.6,169 Crore in the next 10 days to recover
its dues from various defaulting business. Major assets included in this auction are Jain
Infraprojects Ltd, Kamchi Industries Ltd, and Parenteral Drugs. Bank has also put on sale assets
worth Rs.3,645 Crore of some big accounts such as Indian Steel Corporation (Rs.929 crore),
Jai Balaji Industries (Rs.859 crore), Kohinoor Planet Construction (Rs.207.77 crore) and Mittal
Corporation (Rs.859.33 crore).

PTA. PNB says fresh NPAs are coming down; bank strengthening internal mechanism, In
this article Punjab national Bank have given an statement stating that their NPAs have come
down. It is also disclosed in this article that Nirav Modi’s fraud has been provisioned close to
Rs.14,000 Crore. It is also said that all the recoveries will be considered and added to profit of
the bank. PNB’s gross non-performing asset was around Rs.80,000 Crore during September
2018.

15
Aparna Iyer. Axis Bank has fixed its big bad loans, but small loan risks are rising,
According to this article Axis Bank have managed its big size loans, but the risk of small loans
are rising. It is said that due to the new leadership, an unshackled balance sheet and ready to
grow. The gross bad loan ratio has dropped to 5.26% in March quarter from 6.77% in a year.
It is considered that stress among small borrowers have raised by the regulator a year ago. The
share of risky unsecured loans in the retail books is growing rapidly.

Sangita Mehta. Axis to sell 12 NPA accounts to ARCs, in this article, it is disclosed that Axis
Bank is looking to sell a dozen distressed accounts to asset reconstruction companies.
According to this article total loans on block is about Rs.1,000 crore and it includes large
borrowers. Bad loans in the books of Axis Bank as on 17th August, 2018 is Rs.32,662 crore
which is 6.5% of total loan bank and bank is not earning anything on this money

Nikhant Hetavkar. HDFC Bank net up 20.6% to Rs.50 bn in Sep Quarter; gross NPAs rise
1.33%, According to this article, gross NPAs of HDFC Bank as on September 2018 is
Rs.100.98 Billion and net NPAs of bank was Rs.30.28 Billion. The net NPAs of bank were at
0.4% down from 0.43% of net advances as on June 30, 2018. The asset quality for Bank was
steady.

Dutta. A (2014): This paper includes the growth of NPA in the public and private sector banks
in India, and analyses sector wise performance of private and public sector banks.

Das, S. (2010): In this paper, the author has discussed NPAs and hast analysed the parameters
which are actually the reasons of NPAs, and have concluded that market failure, wilful defaults,
poor follow-up and supervision, non-cooperation from banks, poor legal framework, lack of
entrepreneurial skills, and diversion of funds are the main reasons of the never ending growth
of these non-performing assets in banks in India.

Ahmad, Z., Jegadeeshwaran, M. (2013): The present study is done on the NPA, and to find
the main causes for NPA. Secondary data was used and analysed for a period of 5 years and
analysed by mean, CAGR, ANOVA and ranking banks. The banks were ranked according to
their performance in the effective management of the NPAs.

Ranjan, R., Dhal, S.C. (2013): This paper used an empirical approach to analyse the non-
performing loan assets of the Indian commercial banks' nonperforming loans by using
regression analysis. This empirical analysis reaches to conclusion as to how the non-

16
performing loan assets are influenced by three main basis of economic factors and financial
factors, which are terms of credit, bank size and macroeconomic shocks.

Reddy, P.K. (2002): This paper deals with the experiences of other Asian countries in handling
of NPAs. It further looks into the effect of the reforms on the level of NPAs and suggests
mechanisms to handle the problem by drawing on experiences from other countries.

Joseph, A. L. (2014): This study basically studies the trends of NPAs in the banking sector,
and the internal factors, external factors and the other factors which mainly contributes to the
NPAs rising in the banking sector and also provides suggestions to overcoming the burden of
increasing NPAs.

Kamra, S. D. (2013): This study was done to analyse the position of NPAs in 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.

Patidar, S. Kataria, A. (2012): The paper analyses the share of NPA as components of priority
sector lending, and the comparative study was done between the Public Sector Banks and the
Private Sector Banks to find the difference of the NPA and to find out the impact of Priority
Sector Lending on the Total NPA of Banks. Statistical tools like regression and ratio analysis
were used to do this research.

Arora, N., Ostwal, N. (2014): This study analysed the various classification and comparison
of loan assets of public sector banks and private sector banks. This study concluded that NPAs
are the major problems for the banks, and public sector banks have higher level of NPAs, when
compared to the private sector banks.

Patnaik, B.C.M., Satpathy, I. (2012): This research study has made a move to analyse the
main reasons behind the increasing NPAs in the capital loans of the co-operative banks. For
the purpose of this study, various borrowers were surveyed to find out the causes behind these
NPAs.

Patnaik, B.C.M., Satpathy, I. (2011): This research paper has made an attempt to find out the
growing trends and patterns in growth of non-performing assets with special emphasis on the
education loan scheme in Orissa. This paper tries to find the causes behind the NPAs and tries
to suggest the various possible steps to overcome the NPAs.

17
B.S., Waraich, S., Gautam, V. (2013): This study was focused on Cooperative Bank of
Punjab, which tried to study the impact of new loan products on NPAs in co-operative banks
and its growing trends in NPA against the various loan schemes, and a comparative analysis
was made between banks to find out the current situation of the NPAs.

A.K. (2012): This present research paper uses an empirical approach to analyse the profitability
indicators of NPA, and also discusses those major factors due to which there in an increasingly
high growth in NPAs. Statistical tools like correlation and regression were used for this
empirical research.

M.S., Thangavelu, R. (2014): This study has been done with the aim to analyse the concept
of non-performing assets, and the various components of the loan assets that are advanced by
the public and private sector bank with the help of secondary data.

Srinivas, K.T. (2013): This present research study attempts to analyse the reasons for loans
assets and advances that converts into NPAs in the Indian banking Sector and also suggests
robust and effective solutions to overcome the problem of increasing NPAs.

Rai, K. (2012): This research focused on evaluating the operational performance of few
commercial banks and made an effort to find out the growing trends of the increasing NPAs
and to find out the effective measures to be taken for managing the NPAs like credit appraisal
and establishment of monitoring department.

Satpal (2014): This paper made an attempt to evaluate the the actual definition of NPA and to
find out the factors that contribute to the formation of NPAs, and to find the reasons for higher
NPAs and its impact on Indian banking operations.

Rajeev, M., Mahesh, H.P., (2010): This research paper evaluates the growing trends of NPAs
in India from multiple dimensions and also analysed the recognition of the problem through
continuous monitoring.

Yadav, S. (2014): This paper has been written with the help of secondary data, in which author
has made an attempt to showcase that the increasing trends of NPAs and the preventive
measures to control the increasing NPAs in the Indian Banking Sector.

Rakshit, D.,Chakrabarti, S. (2012): This study focuses on understanding the extent of NPAs
in banks and the main reasons behind those accounts which are converting into non-performing
assets in cooperative banks.

18
Kumar, M.,Singh, G. (2012): This study focuses on the significant factors, which lead to the
non-performing assets problem from the perspective of the top bankers of public sector banks
in India and the effective measures necessary for the management of the NPAs.

Gupta, J., Jain, S. (2012): The present study includes the study of performance and the lending
practices of one of the most successful cooperative banks of Delhi, whose customers have taken
various kinds of loans.

Pradhan, T.K. (2012): This research is based on Odisha, and focuses on the mismanagement
and diversion of funds, which are the main causes of the NPA. This study is primarily based
on primary data which has been analysed by percentage method.

Rajput, N, Arora, A.P., and Kaur, B. (2012): This paper focuses on operational efforts of
management of non-performing assets of public sector banks under provisions laid down for
stringent asset classification norms. This paper traces the movement of the nonperforming
assets prevailing in Indian public sector banks and analyses the performance of the banks in
effective management of the NPA.

Rajaraman, I, Vasishtha, G. (2001): The paper studies a panel regression on the definitional
data available on NPA available for a 5 year period ending in 1999-2000. The paper incudes
the study of 27 public sector banks, and explains variations that is homogenous on the
ownership dimension and managerial efficiency.

Gupta, B. (2012): This paper discusses the study on SBI and Associates, and public sector
banks, to understand the concept of NPAs, its magnitude and major reasons for increasing NPA
and has evaluated the managerial performance in managing NPA.

Rajput, N.,Arora, A.P., Kaur, B. (2011): This research tries to find the movement of the
NPAs that is present in public sector banks of India, by analysing the operational performance
of the banks in managing NPA.

Ganesan, D., Santhanakrishnan, R. (2013): In this study, an report has been made to check
the non-performance assets of the SBI since 2002.

Stuti, Bansal, S. (2013): In this study, an effort was made to evaluate the operational
performance of the Public Sector Banks and Private sector bank in India with the help of data
available between the period of 2003-04 and 2007-09, on trends and issues of NPAs. This study

19
also tries to analyse as to how efficiently private and public sector banks have been managing
the issue of NPAs.

Pradhan, T.K. (2012): The present research takes the help of secondary data for a period of 6
years and analyses the reform measures that can help in minimising the NPA in public sector
banks, and the data was analysed by percentage method.

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

Tripathi, L. K., Parashar, A., Mishra, S. (2014): The present research attempts to find the
impact of priority sector advances, and non-collateral advances which were made to sensitive
sectors by major banks like SBI and PNB. This research was done with the help of multiple
regression model.

Jajashree, Kotnal, R., Ahmed, I.,Naikwadi, M: This research includes the explanation of the
basic concepts of non-performing assets. It also deals with finding the magnitude of the NPAs
and the main reasons behind the increasing NPAs in the banking sector. This study was done
with special emphasis on Corporation Bank.

Kaur, H., Saddy, N.K. (2011): This research was done with the aim to understand the concept
of NPA, and to find the major factors which are responsible for the contribution towards the
increasing NPAs and to find the reasons for high NPAs and their impact on Indian banking
Sector and its operations.

Satpathy, I, Patnaik, B.C.M. (2010): This research study attempts to find the causes of non-
performing assets in home loans advanced by the commercial banks. For this, questionnaires
were made to find the suggestions to overcome this problem.

Chaudhary, K., Sharma, M. (2011): This research study was done with an attempt to analyse
the effective management of NPAs by public and private sector banks. Statistical tools were
used to do this analysis.

20
Chapter 3: Research Methodology:

1. Sources of Data:

The data collected for the preparation of this dissertation is both primary and secondary in
nature. The sources of data used for this dissertation include the annual reports and literatures
published by Indian Banks and Reserve Bank of India, various articles, magazines and journals.
The data used in this analysis is restricted to the past one decade, i.e., 2008-2018.

2. Methodology of Study:

For this dissertation, descriptive research method has been used. We have reviewed the
conditions and relationships that already exist. The data has been collected from the Annual
Reports of various public and private sector banks, RBI press release, RBI notifications and
RBI occasional papers. Data of 2 public sector (State Bank of India and Punjab National Bank)
and 2 private sector banks (ICICI Bank and Axis Bank) have been compared to examine the
situation of credit management in both sectors.

3. Techniques of Data Collection and Analysis:

Simple technique of data collection has been used for this dissertation. The observational
method has been further conducted for this descriptive research. Data for this dissertation has
been extracted from various documents and records. The data obtained for this dissertation has
been analyzed using appropriate statistical techniques like averages, financial ratios and
percentages.

21
Chapter 4: Results and Discussions:

NET PROFIT (In Crores)

Year SBI PNB ICICI AXIS

2008 6729.12 2048.76 4157.73 1071.03
2009 9121.23 3090.88 3758.13 1815.36
2010 9166.05 3905.36 4024.98 2514.53
2011 7370.35 4433.5 5151.38 3388.49
2012 11707.29 4884.2 6465.26 4242.21
2013 14104.98 4747.67 8325.47 5179.43
2014 10891.17 3342.58 9810.48 6217.67
2015 13101.57 3061.58 11175.35 7357.82
2016 9950.65 -3974.14 9726.29 8223.66
2017 10484.1 1324.8 9801.08 3679.28
2018 -6547.45 -12282.82 6777.42 275.68

Table 5.3.1

Interpretation from table No.5.3.1 In the above table it is interpreted that, the profits have
changed drastically from year 2008 to 2018. State Bank of India was leading with profits of
Rs.6729 Crores in 2008 but after one decade, in 2018 due to NPA’s SBI have faced a loss of
Rs.6,547 Crores. PNB in 2008 filed a profit of Rs.2048.76 Crores which was estimated as a
good profit in that year but due to the wilful defaulters such as Mr.Nirav Modi, Bank have filed
a loss of Rs.12282 Crores. Icici Bank and Axis Bank have not filed any losses but if we take
date of 10 years from 2008 to 2018 the profits have fallen but private sectors bank have
managed to diversify the portfolio which led to manage their P&L.

22
 Net Profit (Crores)
16000.

8000.
SBI
PNB
ICICI
0. AXIS

-8000.

-16000.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 1

GROSS NPA (In Crores)

Year SBI PNB ICICI AXIS

2008 12837.34 3319.3 7588 494.61
2009 15588.6 2767.46 9803 897.77
2010 19534.89 3214.41 9480.65 1318
2011 25326.29 4379.39 10034.26 1599.42
2012 39676.46 8719.62 9475.33 1806.3
2013 51189.39 13465.79 9607.75 2393.42
2014 61605.35 18880.06 10505.84 3146.41
2015 56725.34 25694.86 15094.69 4110.19
2016 98172.8 55818.33 26720.93 6087.51
2017 112342.99 55370.45 42551.54 21820.48
2018 223427.46 86620.05 54062.51 34248.64

Table 5.3.2
Interpretation from Table No.5.3.2 If we compare Public Sector Banks with Private Sector
Banks, higher NPA’s is declared by Public Sector Banks. Reason behind such activity is
ineffective leadership of Officials of Public Sector Banks. Highest NPA declared is by State

23
Bank of India is Rs.12,837.34 Crores which is a Public Sector Bank, but the second highest
NPA’s declared is by a Private Sector Bank is ICICI Bank which is Rs.7,588 Crores. The reason
behind such high NPA’s is basically leadership problems. Where in SBI there has been a great
problem of ineffective leadership on the other hand Icici Bank Ltd is facing problem in its
leadership because of charges by CBI on their Managing Director Mrs. Chanda Kochar on
account of providing loans without effective checking.

GROSS NPA (Crores)

300000.

225000.

SBI
PNB
ICICI
150000. AXIS

75000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 2

24
 LOANS ADVANCED (In Crores)

YEAR SBI PNB ICICI AXIS

2008 416768.19 121571.05 225616 59661.14
2009 542503.2 154702.98 218311 81556.77
2010 631914.15 186601.2 181206 104343.12
2011 756719.45 242106.67 216366 142407.83
2012 867578.89 293774.76 253727.66 169759.54
2013 1045616.55 308725.21 290249.44 196965.96
2014 1209828.72 349269.13 338702.65 230066.76
2015 1300026.39 380534.8 387522.07 281083.03
2016 1463700.42 412325.8 435263.94 338773.72
2017 1571078.38 419493.15 464232.08 373069.35
2018 1934880.19 433734.72 512395.29 439650.3

Table 5.3.3
Interpretation of Table No.5.3.3:- The above table, describes the situation of loans advanced
by both private sector banks and public sector banks in one decade. Despite of 2008 Financial
crisis which had its impact in the economy for 2 years banks did not manage their loan
providing facilities to their customers effectively. It is researched that the 2008 crisis had its
impact in economy for at least 2008, but if we compare the loans advanced by both public
sector & private sector banks it has not fallen down. It should have been fallen down but the
top management of banks of both sectors banks wanted to save their jobs by generating
business, which have led to rise in the NPA’s.

25
 LOANS ADVANCED (Crores)
2500000.

2000000.

SBI
1500000. PNB
ICICI
AXIS
1000000.

500000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 3

Percentage GROSS NPA of Loan ADVANCED

Year SBI PNB ICICI AXIS

2008 3.080211088 2.730337527 3.36323665 0.829032097

2009 2.873457705 1.788886032 4.490382986 1.10079151

2010 3.091383537 1.722609501 5.231973555 1.263140301

2011 3.346853315 1.808867967 4.63763253 1.123126446

2012 4.573239443 2.968131095 3.734448976 1.064034457

2013 4.895617806 4.361739684 3.310170039 1.215143977

2014 5.092072041 5.405590812 3.101788545 1.367607385

2015 4.363399115 6.752302286 3.895182022 1.462268996

2016 6.707164845 13.53743326 6.139017627 1.796925098

2017 7.150692889 13.19936929 9.166005934 5.84890718

2018 11.54735374 19.97074387 10.55093812 7.789973076

2.

Table 5.4.1

26
Interpretation of table 5.4.1:- Gross NPA of loans advanced by both private sector & public
sector banks have been calculated in the table I. It is interpreted that NPA’s of both the sectors
have risen in last decade.

Percentage (Gross NPA of Loans Advanced)

25.

20.

SBI
15. PNB
ICICI
AXIS
10.

5.

0.
1 2 3 4 5 6 7 8 9 10 11

Graph 4

27
 MEAN of NPA – Public (SBI+PNB) V Private (ICICI+AXIS) Banks (Crores)

Year SBI+PNB ICICI+AXIS

2008 8078.32 4041.305
2009 9178.03 5350.385
2010 11374.65 5399.325
2011 14852.84 5816.84
2012 24198.04 5640.815
2013 32327.59 6000.585
2014 40242.705 6826.125
2015 41210.1 9602.44
2016 76995.565 16404.22
2017 83856.72 32186.01
2018 155023.755 44155.575

Table 5.4.2

Interpretation of table 5.4.2 :- In table III & IV it is interpreted that, the NPA’s of both private
& public sector banks have increased by 200% in a decade which have led to creation of bubble
in economy.

28
Graph MEAN of NPA – Public (SBI+PNB) V Private (ICICI+AXIS)
Banks (Crores)

200000.

160000.

120000. SBI+PNB
ICICI+AXIS

80000.

40000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 5

MEAN NPA of All Banks Together (SBI+PNB+ICICI+AXIS) (Crores)

Year ALL (SBI+PNB+ICICI+AXIS)

2008 6059.8125
2009 7264.2075
2010 8386.9875
2011 10334.84
2012 14919.4275
2013 19164.0875
2014 23534.415
2015 25406.27
2016 46699.8925
2017 58021.365
2018 99589.665

Table 5.4.3

29
Interpretation of Table 5.4.3:- The Mean NPA of all banks together have grown 16 times in
16 times, which have created a bubble in our economy.

Graph - Mean NPA of ALL BANKS TOGETHER

(SBI+PNB+ICICI+AXIS) (Crores)
125000.

100000.

75000.
SBI+PNB+ICICI+AXIS

50000.

25000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 6

MEDIAN of NPA – Public (SBI+PNB) V Private (ICICI+AXIS) Banks (Crores)

Year SBI+PNB ICICI+AXIS

2008 8078.32 4041.305
2009 9178.03 5350.385
2010 11374.65 5399.325
2011 14852.84 5816.84
2012 24198.04 5640.815
2013 32327.59 6000.585
2014 40242.705 6826.125
2015 41210.1 9602.44
2016 76995.565 16404.22
2017 83856.72 32186.01
2018 155023.755 44155.575

Table 5.4.4

30
Interpretation of Table 5.4.4:- The median NPA of Public sector banks and
private sector banks have been interpreted and it is significant that NPAs of Public
Sector banks have always been higher than the Private sector banks.

Graph - MEDIAN of NPA – Public (SBI+PNB) V Private (ICICI+AXIS)

Banks (Crores)
200000.

160000.

120000.
SBI+PNB
ICICI+AXIS

80000.

40000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 7

MEDIAN NPA of ALL BANKS Together (SBI+PNB+ICICI+AXIS) (Crores)

Year ALL
2008 5453.65
2009 6285.23
2010 6347.53
2011 7206.825
2012 9097.475
2013 11536.77
2014 14692.95
2015 20394.775
2016 41269.63

31
 2017 48960.995
2018 70341.28

Table 5.4.5

Interpretation of Table 5.4.5:- Median NPA of all banks together has been
derived by appropriate method.

Graph - MEDIAN NPA of ALL BANKS Together

(SBI+PNB+ICICI+AXIS) (Crores)
80000.

60000.

SBI+PNB+ICICI+AXIS
40000.

20000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 8

MEAN of NET PROFIT - Public (SBI+PNB) V Private (ICICI+AXIS) Banks (Crores)

Year SBI+PNB ICICI+AXIS

2008 4388.94 2614.38

2009 6106.055 2786.745

2010 6535.705 3269.755

2011 5901.925 4269.935

32
 2012 8295.745 5353.735

2013 9426.325 6752.45

2014 7116.875 8014.075

2015 8081.575 9266.585

2016 2988.255 8974.975

2017 5904.45 6740.18

2018 -9415.135 3526.55

Table 5.4.6

Interpretation of Table 5.4.6 :- The Mean of NET Profit of both public sector
banks and private sector banks have been interpreted. It is observed that despite
of growing NPA’s private sector banks have filed higher profits on the other hand
public sector banks have filed losses.

Graph - MEAN of NET PROFIT / PVT – PUB Public (SBI+PNB) V

Private (ICICI+AXIS) Banks (Crores)
15000.

10000.

5000.
SBI+PNB
ICICI+AXIS
0.

-5000.

-10000.

-15000.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 9

33
 MEAN - NET PROFIT of ALL Banks Together (SBI+PNB+ICICI+AXIS) (Crores)

Year ALL (SBI+PNB+ICICI+AXIS)

2008 3501.66
2009 4446.4
2010 4902.73
2011 5085.93
2012 6824.74
2013 8089.3875
2014 7565.475
2015 8674.08
2016 5981.615
2017 6322.315
2018 -2944.2925

Table 5.4.7

Interpretation of Table 5.4.7:- The mean net profit of all banks together have
been derived and in 10 years it have gone negative in numbers.

Graph - Mean of Net Profit of All Banks (SBI+PNB+ICICI+AXIS)

10125.
(Crores

6750.

3375.
SBI+PNB+ICICI+AXIS

0.

-3375.

-6750.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Table 10

34
 MEDIAN of Net Profit – Public (SBI+PNB) V Private (ICICI+AXIS) Banks (Crores)

Year SBI+PNB ICICI+AXIS

2008 4388.94 2614.38
2009 6106.055 2786.745
2010 6535.705 3269.755
2011 5901.925 4269.935
2012 8295.745 5353.735
2013 9426.325 6752.45
2014 7116.875 8014.075
2015 8081.575 9266.585
2016 2988.255 8974.975
2017 5904.45 6740.18
2018 -9415.135 3526.55
Table 5.4.8

Interpretation of Table 5.4.8 :- In this Median of Net profit of public sector banks
and private sector banks have been compared and derived by the prescribed
forumale.

35
Graph - Median of Net Profit - Public (SBI+PNB) V Private
(ICICI+AXIS) Banks (Crores)
15000.

10000.

5000.

SBI+PNB
0. ICICI+AXIS

-5000.

-10000.

-15000.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 11

MEDIAN of Net Profit – All Banks Together (SBI+PNB+ICICI+AXIS)

Year ALL (SBI+PNB+ICICI+AXIS)

2008 3103.245
2009 3424.505
2010 3965.17
2011 4792.44
2012 5674.73
2013 6752.45
2014 8014.075
2015 9266.585
2016 8974.975
2017 6740.18
2018 -3135.885

Table 5.4.9

36
Interpretation of Table 5.4.9:- In the above table, Median of net profit of all
banks together have been derived by the perscribed formulae. The figures have
gone down in one decade, which signifies that the net profit have reduced in 10
years.

Graph - Median of all Banks Together (SBI+PNB+ICICI+AXIS)

(Crores)
11250.

7500.

3750.
SBI+PNB+ICICI+AXIS

0.

-3750.

-7500.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 12

Mean – Loans Advanced – Public (SBI+PNB) V Private (ICICI+AXIS) Banks (Crores)

YEAR SBI+PNB ICICI+AXIS

2008 269169.62 142638.57
2009 348603.09 149933.885
2010 409257.675 142774.56
2011 499413.06 179386.915
2012 580676.825 211743.6
2013 677170.88 243607.7
2014 779548.925 284384.705

37
 2015 840280.595 334302.55
2016 938013.11 387018.83
2017 995285.765 418650.715
2018 1184307.455 476022.795

Table 5.4.10

Interpretation of Table 5.4.10 :- Loans advanced by public sector banks have grown 5 times
in one decade, whereas on the other hand figures of private sector banks have grown 3 times
in one decade. Such figures are derived by the mean of loans advanced of Public Sector banks
and private sector banks.

Graph - Mean of Loans Advaced - Public (SBI+PNB) V Private

(ICICI+AXIS) Banks (Crores)
1500000.

1200000.

900000. SBI+PNB
ICICI+AXIS

600000.

300000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 13

Mean – Loans Advanced All Banks Together (SBI+PNB+ICICI+AXIS) (Crores)

YEAR ALL
2008 205904.095
2009 249268.4875
2010 276016.1175

38
 2011 339399.9875
2012 396210.2125
2013 460389.29
2014 531966.815
2015 587291.5725
2016 662515.97
2017 706968.24
2018 868554.3381

Table 5.4.11

Interpretation of Table 5.4.11 :- The mean of loans advanced by all banks

together have been interpreted. It is interprated that the loans advanced have
grown 4 times in one decade.

Graph - Mean of Loans Advanced - All Banks Together

(SBI+PNB+ICICI+AXIS) (Crores)
1125000.

900000.

675000.
SBI+PNB+ICICI+AXIS

450000.

225000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 14

Median – Loans Advanced – Public (SBI+PNB) V Private (ICICI+AXIS) Banks (Crores)

39
 YEAR SBI+PNB ICICI+AXIS
2008 269169.62 142638.57
2009 348603.09 149933.885
2010 409257.675 142774.56
2011 499413.06 179386.915
2012 580676.825 211743.6
2013 677170.88 243607.7
2014 779548.925 284384.705
2015 840280.595 334302.55
2016 938013.11 387018.83
2017 995285.765 418650.715
2018 1184307.455 476022.795
Table 5.4.12

Interpretation of table 5.4.12: The median of loans advanced by public sector

banks and private sector banks have been interprated by the prescribed method._

Graph - Median of Loans Advaced - Public (SBI+PNB) V Private

(ICICI+AXIS) Banks (Crores)
1500000.

1200000.

900000. SBI+PNB
ICICI+AXIS

600000.

300000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 15

40
 Median – Loans Advanced All Banks Together (SBI+PNB+ICICI+AXIS) (Crores)

YEAR ALL
2008 173593.525
2009 186506.99
2010 183903.6
2011 229236.335
2012 273751.21
2013 299487.325
2014 343985.89
2015 384028.435
2016 423794.87
2017 441862.615
2018 476022.795

Table 5.4.13

Interpretation of Table 5.4.13 :- The median of loans advanced by all banks

together has been interprated. It is interprated that the loans advanced by all banks
together has grown 3 times in one decade.

Graph - Mean of Loans Advanced - All Banks Together

500000.
(SBI+PNB+ICICI+AXIS) (Crores)

375000.

250000.
SBI+PNB+ICICI+AXIS

125000.

0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Graph 16

41
FINDING & SUGGESTIONS
The study of four banks have been conducted. Two of them are public banks, where as other
two are private banks. Three data sets have been taken to conduct the research. First is net
profits made by these banks. Second one is gross NPA of these banks. And last one, the third
one is loans advanced by these banks.

As seen in Chart 5.3.2, it is clearly evident that SBI is the bank with largest net profit of Rs.
6729.12 crore in the year 2008, and increased till the year 2010 up to 9166.05 crore rupees and
then it decreased to 7370.35 crores in 2011 and then kept increasing till the year 2013 and it
was in a very good position. The same scenario was with Punjab National Bank, ICICI Bank
and Axis Bank. It was for the very first time when in year 2016, Punjab National Bank suffered
a net loss of Rs. -3974.14 crores. Subsequently the net profit of other three banks also started
decreasing, and in the year 2018, State Bank of India, the largest public bank in India suffered
a loss of Rs. -6547.45 crore rupees and Punjab National Bank suffered a net loss of Rs. -
12282.82 crores. But private sector banks managed to make profits. But none of the banks
managed to increase the net profit, as seen in Chart 5.3.2.

The net profitability of a bank depends on the gross NPAs of the banks, and the recovery of
the loans advanced by the banks. If we refer to the Chart 5.3.6, we can see that SBI disbursed
the maximum loans since ever. In 2018, SBI disbursed a total of Rs. 191,34,880.19 crores, out
of which a net total of 2,23,427.46 crores resulted as NPA, and which has doubled from the
year 2017, due to which State Bank of India suffered a net loss of Rs. -6547.45 crores.

If we look at the data of ICICI Bank, as of 2018, it has loans advanced of Rs. 512395.29 crores
out of which around Rs. 54065.51 crore was gross NPA, which comes at almost 19.97% of the
total loans advanced by the bank and the same year ICICI made a net profit of around Rs.
6777.42 crore.

If we examine the data of PNB, we can see that in the year 2012, gross NPA of the bank doubled
to Rs. 8719.62 crore from the gross NPA of the year 2010. And hasn’t decreases in any of the
following year, and amounted to increase in 200% increase each year, leading to gross NPA of
Rs. 86,620.05 crore in the year 2018.

Axis Bank is one of the most prominent private sector bank, but the situation here is not very
positive, as its net profit had been increasing till the year 2016. In 2016, the Axis Bank made a
net profit of Rs. 8223.66 crore, but following year, it fell to Rs. 3679.28 crore and in 2018,

42
NPA hit Axis Bank too hard, that it came down too low to Rs. 275.68 crore. In 2016, Axis
Bank had a gross NPA of Rs. 6087.51 crore rupees, which rose 4 times in the year 2017 and
further rose to Rs. 34248.64 crore.

If we refer to table I and table II, it is clearly visible that Axis Bank had been very efficient in
managing NPAs in the starting, but later in year 2017, the percentage of NPA to Loans
advanced was 5.84% which rose to 7.78% in the year 2018. In this scenario, Punjab National
Bank has the worst NPA management as the percentage of NPA to the loans advanced was
around 19.97& which is not decreasing and has been increasing every year by almost 50%.

ICICI bank has also failed to manage their NPA accounts as their NPA percentage to the loans
advanced was net 10.5% in the year 2018, and SBI’s was 11.54%. This increasing percentage
of NPA to the Loans advanced is very dangerous as it is affecting the profitability of the banks
and further the decrease in the interest rates on the deposit accounts. This needs to be controlled
or bank’s lending power may also get affected by this increasing trend of NPA.

As per table III, it can be seen that the mean NPAs of the public banks are higher than the mean
NPAs of the private banks. This trend has been since 2008, when there was a difference of
around Rs. 6000 crore in the mean NPAs of private and public sector banks, but this difference
has widened over the period of 11 years, as seen in the graph in table IV, now the difference in
the year 2008 was of Rs. 1,11,000 crore.

And also, if we look at the mean of all the 4 banks in the table VI, it can be seen that the mean
NPA of the banks has only increased during this period and never decreased, it shows the lack
of effective management of the NPAs by these banks. And this mean NPA of all the banks
combined has increased 15 folds in 2018 since the year 2008.

The same results are seen while calculating the median NPA of these banks, median of public
banks have been higher than the private sector banks. During the period of 2008-2018, as per
table VII & VIII, the median NPA of the public banks has increased 18 times, whereas the
median NPA of the private banks has increased 11 folds. And if we look at the combined NPA
of all these 4 banks in table XIX, it could be said that the median NPA of all the banks together
has increased 14 times during the period of 2008-2018. This adversely affected the profitability
of the banks, which can be seen in table XI – XVIII. The mean net profit of public banks was
Rs. 4388.94 crore in the year 2008, whereas the mean net profit of the private banks was almost
half of the mean net profit of the public sector banks, but in year 2014, mean net profit of
private banks was more than the mean net profit banks of the public banks. And since then the

43
mean net profit of the public banks have been decreasing and became negative in the year 2018,
while the mean net profit of private banks also fell down, and struggled hard to make profits.
Whereas the mean net profit of all the 4 banks together was Rs. 3501.66 crore, which increased
till the year 2013, but became negative in the year 2018 due to the increasing NPAs during the
period of 2014-2018. Similarly, the median net profit of the public banks were higher than the
median net profit of the private sector banks, but the private banks overtook the median net
profit of public sector banks in the year 2014. And since then, public banks have failed in
making profits. But if we look at the median net profit of all the banks, they combined together
managed an increased median net profit till the year 2016 only.

But, now if we analyse the effect of NPAs on the loan advancing power of the banks, we would
see in table XIX-XVI, that the borrowing power has not been much affected by the increasing
trends of the Gross NPAs of the banks. In the year 2008, the State Bank of India and Punjab
National Bank of India combined advanced mean loans of Rs. 2, 69,169.62 crore whereas the
ICICI bank and Axis bank together advanced mean loans of Rs. 1, 42, 638.57 crore, which is
relatively lower than the combined means of the public sector banks, and there has been no
such instances where the private banks advanced more loan than public sector banks during the
period of 2008-2018. The mean advanced loans of all the 4 banks were Rs. 2, 05,904.09 crore
in the year 2008, and which never decreased during the period of 2008-2018, and increased 4.5
times in 2018 during this period. Also, the median of loans advanced of all these banks during
the period of 2008-2018.

44
Chapter 5: Conclusions:
The non-performing assets have been a very big problem for the banking sector in India. This
doesn’t only affect the banking sector in India but also affects the Indian economy. The
percentage of the NPAs to the loans have been increasing rapidly in both the private and public
sector banks. Private Banks are also unable to decrease this ratio, but they are still better at
managing their NPAs when compared to the public sector banks. As we can see in table I and
table II, the percentage of gross NPA to the loans advanced of State Bank of India, Punjab
National Bank, ICICI Bank and Axis Bank in 2008 was 3.08%, 2.73%, 3.63% and 0.82%
respectively. And which increased to 11.54%, 19.97%, 10.55% and 7.78% respectively in
2018. If we compare all these 4 banks, we would find that the Punjab National Bank is the
worst performer in managing their NPAs, followed by State Bank of India, ICICI Bank and
Axis Bank.

But when we compare the status of Public Sector and Private sector banks, the research
concludes that the Private sector banks, if not effectively, then still better managing the NPAs
than the Public Sector Banks. Also, Private banks have managed to make profits, even after
being hit by trends of increasing NPAs, unlike in public sector banks, which have results in
loss of 1000s of crore of rupees. This money being stuck in the case of non-performing assets
have a direct effect on the profitability of the banks as these banks’ income usually depends on
the interests earned on the amount of loans advanced by these banks. This present study
concludes that the extent of non-performing assets is higher in public sector banks in contrast
to the private sector banks. It can be considered that it is far from impossible for banks to have
0 NPA, but still this increasing NPAs must be controlled in order to revive the banking sector
and to boost the economy of India. For this, banks will have to introduce the speedy recovery
process to combat this situation. Reserve Bank of India, which is the Central Bank of India,
should revise the existing credit appraisals and the monitoring system, and banks should
improve upon the existing methods of loan recovery process, and strengthen them and should
also bring new methods of loan recovery. Credit appraisal and the monitoring system are the
two very important and crucial steps that all the banks should focus on, especially public sector
banks. For this, banks should do regular follow-up with the defaulters and remind them, and if
possible personal visits may also be made.

45
Literature Cited (References):
The following sources have been referred during the preparation of this dissertation:

1. 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
Papers. Vol. 24. No. 3. Winter 2003: Reserve Bank of India. Retrieved from the Reserve
Bank of India: https://www.rbi.org.in/scripts/PublicationsView.aspx?id=7206
2. Private banks record 450 per cent jump in NPAs, ICICI Bank tops the list: Report. (2018,
May21). Business Today. Retrieved from Business Today:
https://www.businesstoday.in/sectors/banks/bank-npas-450-percent-icici-bank-hdfc-axis-
yesbank-bad-loans-rbi/story/277356.html
3. ICICI Bank Q3 profit down 3%; gross NPA additions lowest in 14 quarters. (2019,
January30). Moneycontrol. Retrieved from Moneycontrol:
https://www.moneycontrol.com/news/business/earnings/icici-bank-q3-net-profit-down-3-
gross-npa-additions-lowest-in-14-quarters-3457741.html
4. 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
5. 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
Papers. Vol. 24. No. 3. Winter 2003: Reserve Bank of India. Retrieved from the Reserve
Bank of India: https://www.rbi.org.in/scripts/PublicationsView.aspx?id=7206
6. State Bank of India Balance Sheet as on 31st March 2018: State Bank of India. Retrieved
from State Bank of India:
https://www.sbi.co.in/AR1718/assets/PDF/English/7%20Financial%20Statement.pdf
7. Dutta, A (2014) Empirical Study on Non-Performing Assets Management Of Indian
Commercial Sector Banks. Retrieved from, Perspective, Vol 6, no. 2. Pp. 18-22.

8. Das, S (2010) Management of Non-Performing Assets In Indian Public Sector Banks With
Special Reference To Jharkhand. Retrieved from:

http://www.igidr.ac.in/newspdf/money/mfc_10/Santanu%20Das_submission_45.pdf

46
9. Ahmad, Z., Jegadeeshwaran, M. (2013) Comparative Study On NPA Management Of
Nationalised Banks. Retrieved from International Journal of Marketing, Financial Services
and Management Research, ISSN 2277- 3622, Vol.2, No. 8, August (2013).

10. Ranjan, R, Dhal, S.C. (2003) Non-Performing Loans and Terms of Credit of Public Sector
Banks in India: An Empirical Assessment. Retrieved from Reserve Bank of India
Occasional Papers, Vol. 24, No. 3, Winter 2003.

11. Reddy, P. K. (2002) A comparative study of Non-Performing Assets in India in the Global
context - similarities and dissimilarities, remedial measures. Retrieved from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=361322.

12. Joseph, A.L., Prakash, M (2014) A Study on Analysing the Trend of NPA Level in Private
Sector Banks and Public Sector Banks. Retrieved from International Journal of Scientific
and Research Publications, Volume 4, Issue 7, July 2014 1 ISSN 2250- 3153.

13. Samir, Kamra, D., (2013) A Comparative Analysis of Non- Performing Assets (NPAs) of
Selected Commercial Banks in India Opinion: Retrieved from International Journal of
Management, Vol. 3, No. 1, June 2013, ISSN: 2277-4637 (Online) | ISSN: 2231- 5470
(Print).

14. Patidar, S., Kataria, A. (2012), Analysis OfNpa In Priority Sector Lending: A Comparative
Study Between Public Sector Banks And Private Sector Banks Of India. Retrieved from
Bauddhik Volume 3, No.-1, Jan-April-2012.

15. Arora, N, Ostwal,N (2014),Unearthing The Epidemic Of Non-Performing Assets: A Study

Of Public And Private Sector Banks. Retrieved from SMS Varanasi, Vol. X, No. 1; June
2014.

16. Bartaria,I, Parveern,S (2014) Some Perspectives of Banking Industry in Global Scenario.
Retrieved from International Journal Of Engineering Research and Management
Technology, May- 2014 Volume 1, Issue 3 ISSN: 2348-4039.

17. Patnaik, B.C.M., Satpathy, I, Patnaik,N (2012) Decoding The Npas In Working Capital
Loan: A Survey (With Special Reference To Urban Co-Operative Banking Organizations‟
In Selected Districts Of Odisha) Retrieved from IJRFM Volume 2, Issue 5 (May 2012)
(ISSN 2231-5985).

47
18. Patnaik, B.C.M, Satpathy, I, Mohapatra, A.K.(2011) Demystifying Npas On Education
Loan: A Survey (With Special Reference To Selected Urban, Rural Areas And Bank
Officials Of Odisha). Retrieved from JBFSIR Volume 1, Issue 4 (July, 2011) ISSN 2231-
4288.

19. Bhatia, B.S., Waraich, S, Gautam, V (2013) Critical Evaluation Of Non-Performing

Advances In Dccbs Of Punjab. Retrieved from Abhinav International Monthly Refereed
Journal of Research In Management and Technology, ISSN – 2320-0073 Volume II, July
13.

20. Rajput, N., Gupta,M., Chauhan, A.K. (2012) Profitability And Credit Culture Of NPAs:
An Empirical Analysis Of Psbs . Retrieved from International Journal of Marketing,
Financial Services and Management Research, Vol.1 Issue 9, September 2012.

21. Ibrahim, M.S., Thangavelu,R (2014), A Study on the Composition of Non-Performing

Assets (NPAs) of Scheduled Commercial Banks in India. Retrieved from Journal of
Finance and Bank Management, March 2014, Vol. 2, No. 1.

22. K T, Srinivas (2013),A Study On Non- Performing Assets Of Commercial Banks In India.
Retrieved from Abhinav International Monthly Refereed Journal of Research In
Management and Technology,Volume II, December‟13 ISSN – 2320-0073.

23. Rai,K (2012) Study On Performance Of NPAs Of Indian Commercial Banks. Retrieved

from AJRBF, Volume 2, Issue 12 (December, 2012) ISSN: 2249‐7323.

24. Satpal (2014),A Comparative study of Non-Performing Assets in Public and Private Sector
Banks in the New Age of Technology. Retrieved from International Journal of Current
Engineering and Technology, Vol.4, No.4 (Aug 2014), E-ISSN 2277 – 4106, PISSN 2347
– 5161.

25. [19]. Rajeev, M., Mahesh, H.P. (2010) Banking Sector Reforms and NPA: A study of
Indian Commercial Banks (Working Paper 252).

Retrieved from:

http://www.isec.ac.in/WP%20252%20%20Meenakshi%20Rajeev%20and%20H%20P%2
0Mahesh.pdf

48
26. Yadav, S (2014) NPAs: Rising Trends and Preventive Measures in Indian Banking Sectors.
Retrieved from Volume 2, Issue 1, January 2014, International Journal of Advance
Research in Computer Science and Management Studies, ISSN: 2321-7782.

27. Rakshit, D, Chakrabarti, S. (2012). NPA Management of Rural Cooperative Banks of West
Bengal: An Overview. Retrieved from Volume-I, No.-3, January -- June 2012 Business
Spectrum ISSN-2249-4804.

28. Kumar,M., Singh,G (2012)Mounting Npas In Indian Commercial Banks. Retrieved from
International Journal of Transformations in Business Management, (IJTBM) 2012, Vol.
No. 1, Issue No. 6, Apr-Jun ISSN: 2231-6868.

29. Gupta,J., Jain, S.,(2012) A study on Cooperative Banks in India with special reference to
Lending Practices. Retrieved from International Journal of Scientific and Research
Publications, Volume 2, Issue 10, October 2012, ISSN 2250-3153.

30. Pradhan, T.K. (2012) Management of NPA in the Commercial Banks in Odisha: An
Empirical Analysis. Retrieved from International Journal of Scientific and Research
Publications, Volume 2, Issue 9, September 2012, ISSN 2250-3153.

31. Rajput, N., Arora, A.P., Kaur, B (2012) Management Of Non-Performing Assets A Study
Of Indian Public Sector Banks. Retrieved from IJMIE Volume 2, Issue 4, April 2012, ISSN:
2249-0558.

32. Rajaraman, I., Vasishtha, G. (2001) Non-Performing Loans of PSU Banks: Some Panel
Results (Discussion Paper), November2001.

33. Gupta, B. (2012) A Comparative Study of Non-Performing Assets of SBI and Associates
and Other Public Sector Banks. Retrieved from SIT Journal of Management, Vol. 2.No. 2.
December 2012.

34. Rajput, N., Arora, A.P., Kaur, B (2011) Non-performing assets in the Indian public sector
banks: an analytical study. Retrieved from Banks and Bank Systems, Volume 6, Issue 4,
2011.

35. Ganesan, D., Santhanakrishnan, R., (2013) Non-Performing Assets: A Study Of State Bank
Of India. Retrieved from Asia Pacific Journal Of Research, October 2013, Volume: I, Issue:
X.

49
36. Stuti, Bansal, S., (2013) An Analysis Of Non- Performing Assets In Indian Banking Sector.
Retrieved from Vignettes of Research, Volume - I, Issue - IV ISSN : 2320 – 1797 October
– 2013.

37. Pradhan, T.K. (2012). Non-Performing Assets (NPA) – A major source of weakness of
Public Sector Banks. Retrieved from RJCBS: Volume: 01, Number: 12, October-2012.

38. Selvarajana, B., Vadivalagan, G., (2013) A Study on Management of Non-Performing

Assets in Priority Sector reference to Indian Bank and Public Sector Banks (PSBs).
Retrieved from International Journal of Finance and Banking Studies IJFBS, Vol.2 No.1,
2013 ISSN: 2147-4486.

39. Tripathi, L. K., Parashar, A, Mishra, S., (2014) A Comparative Study Of Advances
Contributing To Non-Performing Assets Between Sbi Group and Nationalised Banks.
Retrieved from International Journal Of Marketing, Financial Services and Management
Research, ISSN 2277-3622, IJMFSMR, Vol.3 (7), JULY (2014).

40. Kotnal, J.R., Ahmed, I., Naikwadi, M (2012) A Study On Management Of Non-Performing
Assets In District Central Cooperative Bank Retrieved from
http://elkjournals.com/masteradmin/uploadfolder/1.%20a%20study%20

41. Kaur, H., Saddy, N.K. (2011) A Comparative Study Of Non-Performing Assets Of Public
And Private Sector Banks. Retrieved from International Journal Of Research In Commerce
and Management, Volume No. 2 (2011), Issue No. 9 (September) Issn 0976- 2183.

42. Satpathy, I., Patnaik, B.C.M., Pradhan, P.K., (2010) NpasIn Home Loan: A Survey (With
Special Reference To Selected Districts Of Odisha). Retrieved from International Journal
Of Research In Commerce and Management, Volume No: 1 (2010), Issue No. 8
(December) Issn 0976-2183.

43. Chaudhary, K., Sharma, M., (2011) Performance of Indian Public Sector Banks and Private
Sector Banks: A Comparative Study International Journal of Innovation, Retrieved from
Management and Technology, Vol. 2, No. 3, June 2011.

44. Taori K.J., “Problems and Issues relating to Management of Non Performing Assets of
Banks in India” – The Journal of Indian Institute of Bankers– April June 2000, Volume 2,
p.no – 21- 24.

50
45. Murthy C.R.K., “Branch Level Management of Non Performing Assets: Part III – Effective
Management of Civil Litigation” – Vinimaya, Vol.XXI, No.2, 2000 – 2001 p.no: 5-11.

46. Kaveri V.S., Faculty, National Institute of Bank Management, Pune,” Prevention of NPAs–
Suggested strategies” - IBA Bulletin, August 2001.

47. Rajendra Kakker. “NPA Management – Role of Asset Reconstruction Companies” – IBA
Bulletin– Volume 4 – p.no: 11- 14, 2004.

48. Bardia S.C., “Credit Efficiency in Banks: A Comparative Study”, The ICFAI University
Press, August 2004, p.no – 60-67, 2004.

49. Valasamma Antony, “Non Performing Assets – A menace to the Banking Industry.”
Southern Economist, p.no. 20 – 23, January 2004.

51