Comparative Analysis of NPAs of Public and Private Sector Banks in India

Under Guidance of Dr. Pooja Malhotra ASSISTANT PROFESSOR (USMS)

By Birendra Debbarma MBA (FM) ENROLL NO. 05416659311

Introduction
The banking industry has undergone a sea change after the first phase of economic liberalization in 1991 and hence credit management. While the primary function of banks is to lend funds as loans to various sectors such as agriculture, industry, personal loans, housing loans etc., in recent times the banks have become very cautious in extending loans. The reason being mounting non-performing assets (NPAs). An NPA is defined as a loan asset, which has ceased to generate any income for a bank whether in the form of interest or principal repayment. As per the prudential norms suggested by the Reserve Bank of India (RBI), a bank cannot book interest on an NPA on accrual basis.

Private Sector Bank All those banks where greater parts of stake or equity are held by the private shareholders and not by government are called "privatesector banks.

Public Sector Banks Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by a government. The shares of these banks are listed on stock exchanges. There are a total of 26 PSBs in India.

A Comparison
Banks Network Banks Growth Productivity Capital Adequacy Asset Quality Management Efficiency Earnings Quality Liquidity

Parameter 1: Banks Network

Parameter 2: Banks Growth

% Growth in Balance Sheet Size 2010 New Private Sector Banks 10.86% 2011 23.51% 2010 -2.19% 2011 14.63% % Growth in Total Income

Public Sector Banks

17.93%

19.21%

12.46%

16.71%

Parameter 3: Productivity

Parameter 4: Capital Adequacy

Parameter 5: Asset Quality

Parameter 6: Management Efficiency

Parameter 7: Earnings Quality

Parameter 8: Liquidity

Conclusion
It can be concluded that most of the new private sector banks have shown better performance than their public sector counterparts during the period 2009-11. This in a way is very good for Indian banking system since past says that private banks are the most hit during recession. The main reasons for their better performance were: New private sector banks have shown better net interest income margin and fee income than most of the public sector banks. The credit-deposit & investment-deposit ratio of new private sector banks were higher which reflected in higher interest income. The operating efficiency was higher for most of the new private sector banks. The Return on Equity (ROE) was higher due to better asset quality.

Thank You