Project On Business Research

(Topic:- Study of NPA in Public sector Bank)

Submitted To:-
Proff. SP Ketkar

Submitted By:-
Priyaranjan Choudhury
Rahul Kumar
Rahul Kumar Sharma
Rajdeep Sarkar
Rajlaxmi Gupta
(Group-E8)
 ACKNOWLEDGEMENT

There are five people who have contributed their knowledge, effort and
guidance to make this project as a success. This is an occasion to express
our heart-felt gratitude to all of them.
We are heartily thankful to Proff. SP Ketkar for his kind support and
guidance
We are also thankful to our friends for their support, cooperation and
guidance. We are highly thankful to internet services for giving us
solution where ever we need that. And again thank to Ketkar sir giving
us guidance where ever we have any problem.
 Content

1. Introduction

2. Research Operation

3. Objective

4. Research Methodology

5. Analysis and Interpretation

6. Conclusion
INTRODUCTION

After liberalization the Indian banking sector developed very appreciate.

The RBI also nationalized good amount of commercial banks for proving socio
economic services to the people of the nation.

The Public Sector Banks have shown very good performance as far as the
financial operations are concerned. If we look to the glance of the financial
operations, we may find that deposits of public to the Public Sector Banks have
increased from 859,461.95crore to 1,079,393.81crore in 2009, the investments of
the Public Sector Banks have increased from 349,107.81crore to 545,509.00crore,
and however the advances have also been increased to 549,351.16crore from
414,989.36crore in 2009.

The total income of the public sector banks have also shown good
performance since the last few years and currently it is 128,464.40crore. The
Public Sector Banks have also shown comparatively good result. The gross profits
of the Public Sector Banks currently 29,715.26crore which has been doubled to the
last to last year, and the net profit of the Public Sector Banks is 12,295,47crore.

However, the only problem of the Public Sector Banks these days are the
increasing level of the non performing assets. The non performing assets of the
Public Sector Banks have been increasing regularly year by year. If we glance on
the numbers of non performing assets we may come to know that in the year 1995
the NPAs were 38,386crore and reached to 80,246crore in 2009.

The only problem that hampers the possible financial performance of the
Public Sector Banks is the increasing results of the non performing assets. The non
performing assets impacts drastically to the working of the banks. The efficiency
of a bank is not always reflected only by the size of its balance sheet but by the
level of return on its assets. NPAs do not generate interest income for the banks,
but at the same time banks are required to make provisions for such NPAs from
their current profits.

 NPAs have a deleterious effect on the return on assets in several ways –

  They erode current profits through provisioning requirements

 They result in reduced interest income

 They require higher provisioning requirements affecting profits and

accretion to capital funds and capacity to increase good quality risk assets in
future, and They limit recycling of funds, set in asset-liability mismatches,
etc.

The RBI has also tried to develop many schemes and tools to reduce the non
performing assets by introducing internal checks and control scheme, relationship
managers as stated by RBI who have complete knowledge of the borrowers, credit
rating system, and early warning system and so on. The RBI has also tried to
improve the securitization Act and SRFAESI Act and other acts related to the
pattern of the borrowings.

Though RBI has taken number of measures to reduce the level of the non
performing assets the results is not up to the expectations. To improve NPAs each
bank should be motivated to introduce their own precautionary steps. Before
lending the banks must evaluate the feasible financial and operational prospective
results of the borrowing companies. They must evaluate the business of borrowing
companies by keeping in considerations the overall impacts of all the factors that
influence the business.
 Objective of the study

Primary objective:

The primary objective of the making report is:

 To know why NPAs are the great challenge to the
Public Sector Banks

Secondary objectives:
The secondary objectives of preparing this report are:
 To understand how NPA is related to repo rate and reverse
repo rate.
 To understand how NPA is related to CRR and SLR.
 To Study how NPA is related with GDP growth rate
Research methodology
The research methodology means the way in which we would complete our
prospected task. Before undertaking any task it becomes very essential for any one
to determine the problem of study. I have adopted the following procedure in
completing my report study.

1. Formulating the problem

2. Research design
3. Determining the data sources
4. Analysing the data
5. Interpretation
6. Preparing research report

(1) Formulating the problem

We are interested in the banking sector and we want to make our future in
the banking sector so decided to make our research study on the banking sector.
We analysed first the factors that are important for the banking sector and we came
to know that providing credit facility to the borrower is one of the important
factors as far as the banking sector is concerned. On the basis of the analysed
factor, we felt that the important issue right now as far as the credit facilities are
provided by bank is non performing assets. We started knowing about the basics of
the NPAs and decided to study on the NPAs. So, We chose the topic “Non
Performing Assets the great challenge before the Public Sector Banks”.

(2) Research Design

The research design tells about the mode with which the entire project is
prepared. Our research design for this study is basically analytical. Because We
have utilized the large number of data of the Public Sector Banks.

(3) Determining the data source

The data source can be primary or secondary. The primary data are those
data which are used for the first time in the study. However such data take place
much time and are also expensive. Whereas the secondary data are those data
which are already available in the market. These data are easy to search and are not
expensive too. For our study we have utilized totally the secondary data.

(4) Analysing the data

The primary data would not be useful until and unless they are well edited
and tabulated. When the person receives the primary data many unuseful data
would also be there. So, We analyzed the Secondary data by using the SPSS tools.

(5) Interpretation of the data

With use of analyzed data We managed to prepare our project report. But
the analyzing of data would not help the study to reach towards its objectives. The
interpretation of the data is required so that the others can understand the crux of
the study in more simple way without any problem.

(6) Project writing

This is the last step in preparing the project report. The objective of the report
writing was to report the findings of the study to the concerned authorities.

4. Limitations of the study

The limitations that We felt in our study are:

 It was critical for us to gather the financial data of the every bank of the
Public Sector Banks so the better evaluations of the performance of the
banks are not possible.

 Since our study is based on the secondary data, the practical operations as
related to the NPAs are adopted by the banks are not learned.

 Since the Indian banking sector is so wide so it was not possible for us to
cover all the banks of the Indian banking sector
 Analysis:
Statistics
for priority for non priority
sector sector for public sector
N Valid 15 15 15
Missing 0 0 0
Mean 22769.33 22412.27 964.00
Median 22954.00 23107.00 1055.00
a a
Mode 19106 14163 299a
Std. Deviation 2010.610 4877.464 484.631
Minimum 19106 14163 299
Maximum 25287 28524 1711
a. Multiple modes exist. The smallest value is shown

Interpretation:
From the above table we got that the average value of NPA in priority sector is
22769.33cr. ,then for non priority sector is 22412.27cr. and for public sector the
avg. NPA is 964cr. Hence from the above data we came to know that Avg. NPA
value of Public sector is very less than to other two sector. Again from median data
we clear that in priority sector 50% more and 50%less value lies in between the
value 22954cr. And in non priority sector 50% value lies in between the value of
23107cr. And for public sector 50% value lies in between the value of 1055cr.

Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
for priority sector 15 19106 25287 22769.33 2010.610
for non priority sector 15 14163 28524 22412.27 4877.464
for public sector 15 299 1711 964.00 484.631
Valid N (listwise) 15

Interpretation:
For non priority sector the value is more deviate as compare to other two sector. So
we can say that NPA performance of public sector is better than other two sector.
Again we can say that the range of NPA for priority sector is 6181cr. , for non
priority sector the range is 14361cr. And for public sector the range is 1412cr.
CRR V/S Total NPA

Interpretation:
From the above graph it is clear that with less CRR the NPA amount is High and
with high CRR the NPA amount is less.
GDP growth V/S Total NPA:
 Interpretation:
From the above graph it is clear that by increasing GDP growth the total NPA
amount increases because the purchasing power of different sector increases and
people gets more loan from bank and finally don’t able to paid the actual debt.

Repo rate V/S NPA in priority Sector:

Interpretation:
By increasing the repo rate the percentage of NPA in priority sector decreases.

Repo rate V/S Non priority sector:

Interpretation:
From the above graph we can interpret that by increasing repo rate, percentage of
NPA in non priority sector increases, it has no effect on repo rate.

Repo rate V/S public sector:

Interpretation:
From the above graph we can interpret that banks are also not concern about to
give loan to public sector instead of increase in repo rate.

Regression Analysis:

Model Summaryb
 Adjusted R Std. Error of the
Model R R Square Square Estimate
1 .911a .830 .618 3807.166
a. Predictors: (Constant), SLR, GDPgrowth, CRR, Reporate,
Reverserepo
b. Dependent Variable: Total

Interpretation:
From the above table we can interpret that this five variable(CRR,SLR,GDP
growth, Repo rate, Reverse repo rate) together explore 61.8% variation of its
dependent variable.

ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regression 2.833E8 5 56660783.269 3.909 .106a
Residual 57978055.757 4 14494513.939
Total 3.413E8 9
a. Predictors: (Constant), SLR, GDPgrowth, CRR, Reporate, Reverserepo
b. Dependent Variable: Total

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) -169957.853 240833.533 -.706 .519
CRR -2024.203 1195.023 -.491 -1.694 .166
GDPgrowth -1774.088 881.564 -.611 -2.012 .114
Reporate 436.586 2771.899 .094 .158 .882
Reverserepo 1654.709 3465.738 .306 .477 .658
SLR 9267.920 9743.278 .476 .951 .395
a. Dependent Variable: Total
Conclusion To The Problem
A report is not said to be completed unless and until the conclusion is given
to the report. A conclusion reveals the explanations about what the report has
covered and what is the essence of the study. What our project report covers is
concluded below.

The problem statement on which we focused our study is “NPAs the big
challenge before the Public Sector Banks”. The Indian banking sector is the
important service sector that helps the people of the India to achieve the socio
economic objective. The Indian banking sector has helped the business and service
sector to develop by providing them credit facilities and other finance related
facilities. The Indian banking sector is developing with good appreciate as
compared to the global benchmark banks. The Indian banking system is classified
into scheduled and non scheduled banks. The Public Sector Banks play very
important role in developing the nation in terms of providing good financial
services. The Public Sector Banks have also shown good performance in the last
few years.

The only problem that the Public Sector Banks are facing today is the
problem of non performing assets. The non performing assets means those assets
which are classified as bad assets which are not possibly be returned back to the
banks by the borrowers. If the proper management of the NPAs is not undertaken it
would hamper the business of the banks. The NPAs would destroy the current
profit, interest income due to large provisions of the NPAs, and would affect the
smooth functioning of the recycling of the funds.
 If we analyse the past years data, we may come to know that the NPAs have
increased very drastically after 2001. In 1997 the gross NPAs of the Indian
banking sector was 47,300crore where as in 2001 the figure was 63,883 and which
increased at faster rate in 2003 with 94,905crore. The Public Sector Banks involve
its nearly 50% of share in the NPAs.Thus we can imagine how Public Sector
Banks are functioning.

The RBI has also been trying to take number of measures but the ratio of
NPAs is not decreasing of the banks. The banks must find out the measures to
reduce the evolving problem of the NPAs. If the concept of NPAs is taken very
lightly it would be dangerous for the Indian banking sector. The reduction of the
NPAs would help thebanks to boost up their profits, smooth recycling of funds in
the nation. This would help the nation to develop more banking branches and
developing the economy by providing the better financial services to the nation