SYNOPSIS

A study on

NON PERFORMING ASSETS THE GREAT CHALLENGE

BEFORE THE PUBLIC SECTOR BANKS

Submitted in Partial Fulfillment of the Requirements of

Bangalore University for the Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION

By

NIROOP K MURTHY
REG. No:09SKCMA043

Under the Guidance of

Prof. Rakesh Sud

EMPOWERING MINDS

Acharya Institute of Management & Sciences

1st Cross, 1st Stage, Peenya Industrial Area

Bangalore – 560 058

2009 – 2011
1 . 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 2003, 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 2003.

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 1997 the NPAs were 47,300crore and reached to 80,246crore
in 2002.

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

2. STATEMENT OF THE PROBLEM

I am interested in the banking sector and I want to make my future in the banking
sector so decided to make my research study on the banking sector. I analyzed first the factors
that are important for the banking sector and I 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 analyzed factor, I felt that the important issue right now as far as the credit facilities are
provided by bank is non performing assets. I started knowing about the basics of the NPAs and
decided to study on the NPAs. So, I chose the topic “Non Performing Assets the great challenge
before the Public Sector Banks”.

3. OBJECTIVE OF THE STUDY

• To know why NPAs are the great challenge to the Public Sector Banks
• To understand what is Non Performing Assets and what are the underlying
reasons for the emergence of the NPAs
• To know what steps are being taken by the Indian banking sector to reduce NPAs?

• To understand the impacts of NPA’s on the operations of the Public Sector Banks

• To evaluate the comparative ratios of the Public Sector Banks

4. RESEARCH METHODOLOGY

RESEARCH DESIGN

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

Source of data collection

 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 my study.

5. SAMPLING DESIGN

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, I will
analyse the data and edit them and turn them in the useful tabulations. So, that can become useful
in my report study. With use of analysed data I will manage to prepare my 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 so I will add the chapter of analysis that would explain others to understand
my study in simpler way.

6. PLANNING AND ANALYSIS

For the analysis the data will be edited and turned them in useful tabulations. Charts will
be drawn and inference will be written accordingly.

RESEARCH LIMITATIONS
• It’s critical 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 my 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 me to cover
all the banks of the Indian banking sector.

SCOPE OF THE STUDY

 The main aim behind making this report is to know how Public Sector Banks are
operating their business and how NPAs play its role to the operations of the Public Sector Banks.
The report NPAs are classified according to the sector, industry, and state wise. The present
study also focuses on the existing system in India to solve the problem of NPAs and comparative
analysis to understand which bank is playing what role with concerned to NPAs.Thus, the study
would help the decision makers to understand the financial performance and growth of Public
Sector Banks as compared to the NPAs.

7. CHAPTER SCHEME
Chapter 1- INTRODUCTION

It includes the theoretical aspect of the study and introduction to the

research topic.

Chapter 2- RESEARCH METHODOLOGY

Which includes Introduction part, Need for the study, Statement of the
problem, Scope of the study, Hypothesis, Objective, Research design,
Sample design, Source of data, Tools of analysis, Limitation of Study.

Chapter 3- INDUSTRY PROFILE .

Which includes brief introduction about the Indian Banking Industry and
their reforms.

Chapter 4- DATA ANALYSIS AND INTERPRETATION

It includes Analysis and interpretation of data. Analysis is carried on by

preparation of Tables, Graphs.

Chapter 5- FINDINGS AND SUGGESTIONS

It contains the Summary of findings and Suggestion. This chapter gives

summary of findings of the study along with the suggestion.

Chapter 6- CONCLUSION
 This chapter gives conclusion of the study.

Guide’s Signature Student’s Signature