ABSTRACT: As the Indian financial sector is largely bank-centric, the performance of the banking

sector is crucial in the development process of the economy. As per KPGM-CII report, India’s banking
sector has the potential to become the fifth largest banking industry in the world by 2020. However, there
are some serious threats this sector has been faced in the last 5 years. This is one the non performing
asset. Today the India banking industries is facing serious problem of bad loans. This is dangerous for our
economy. The rising the level of NPA has direct impact on the financial condition of the banking sector .
for this purpose we study the trend of NPA in top 5 private sector bank in india. And also judge their
performance to manage their NPA by compare their NPA ratio. And also give a suggestion to tackle this
problem.

KEYWORD GROSS NPA, NET NPA AND PRIVATE BANK, NET PROFIT.

INTRODUCTION Today there is serious threat in the banking industry that is nonperforming
loans. our banking industry facing this serious problem. Our public sector bank facing this
problem largely as compare to private banks. It will be very dangerous for our economy in case
future. Banks take deposits from customers and give them out to companies or individuals as
loans. Thus, a deposit is a liability (since it has to be paid back to the customer) and a loan is an
asset (since it generates income in the form of interest for the bank).

A non-performing asset is a loan on which the borrower has stopped paying interest and/or
principal. It is up to the banks to provide for the loss of the asset (if the principal is not paid).
Thus, provisioning for NPAs hits the profits and losses (because of the interest income on loans
that go bad) and balance sheets of banks.

Bad loans are a part of life for the banking sector and follow the overall trend of the economy.
So, in the 2003-’04 and 2007-’08 financial year, as the economy boomed, NPAs fell from 7% to
around 2% of total advances of loans made by banks. However, 2008-’09 onwards, NPAs have
risen steadily. For the first half of the 2016-’17 financial year, bad loans constituted more than
9% of total advances. The problem is most acute in public sector banks, where NPAs were nearly
12% of total advances for the first half of the just-concluded financial year. India’s public sector
banks had about Rs 6 lakh crores in non-performing assets as of December.

Literature review

Vaibhavi Shah and Sunil Sharma February, 2016 He also give meaningful suggestion to govt
of india to set up special committee with a legal expert who having a knowledge and expert
of finance sector to mananaging non performing asset. He also said that the bank should
not take asteps to solve current trend but also take prevention steps to reduce this problem
in future.

Dr. Poonam MahajanJuly 2014 he also conclude that the level of nonperforming asset are
increasing in public banks are more as compare to private and forgian banks

[Link] Kumar Gupta1, Priyanka Gautam JAN 2017 also conducted a special study
on NPA Of PNB observed that the level of NPA increasing in PNB very high rare as compare to
previous years. He also suggest that the bank also exercise the pre and post sanction supervision
of loan process. Bank also suggest that the bank should organize a awareness camp to how
efficient use of fund.

Ayub Ahamed KS Vishwanath Panwar dec 2016 He was conducting a research on

public and private bank and he also conclude that the level of NPA increasing in publics sector
banks high as compare to private banks he also said that the 2016 are the blacked mark for public
sector bank the percentage increasing double rate as compare to previous years.

SatpalA * (Aug 2014) He was also conducting a study on NPA of public and private banks in
India . He also give the meaning full reasons that helps us for rising NPA . tey also suggest
various internal and external factor for rising NPA. He also conclude that the level of NPA is
very high as compare to private bank. He also give meaningful suggestion that the public bank s
staff also give the training to tackle this problem of NPA and also organize a recovery camp in
defaulter area by bank.

Dr. Biswanath Sukul January. 2017 he was conducting a research on npa of sected private
bank and he also suggest that the visit there borrower unit time to time . and close monitoring
there client both pre or post sanction loan. He also give a meaningful suggestion that treating a
willful default as a criminal offence.

Dr. Mohammad Miyan Jan-Feb 2017 he was conducted a study on npa of public and private
banks a staticle approach and also conclude that the public bank having a NPA high as
compare to private bank. He also said that the management of private bank is more professional
and experience to tackle the problem of NPA as compare to public banks.
Serval previous research conducting on comparision of npa of publc and private banks. But they
have taken a 3-3 factores. I have taken of 5 -5 different public and private banks with fresh and
upto date data. Because NPA is changing trend every year result is different from the previous
result.

WHAT IS NPA?

• The assets of the banks which don't perform (that is - don't bring any return) are called Non
Performing Assets (NPA) or bad loans. Bank's assets are the loans and advances given to
customers. If customers don't pay either interest or part of principal or both, the loan turns into
bad loan.

• According to RBI, terms loans on which interest or installment of principal remain overdue for
a period of more than 90 days from the end of a particular quarter is called a Non-performing
Asset.

DEFINATION

Non performing Assets An asset, including a leased asset, becomes non performing when it
ceases to generate income for the bank.
A non performing asset (NPA) is a loan or an advance where;
i . interest and/ or installment of principal remain overdue for a period of more
Than 90 days in respect of a term loan,
ii. The account remains „out of order „for more than 90 days in respect of an Overdraft/Cash
Credit (OD/CC),
iii. The bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted,
iv. the installment of principal or interest thereon remains overdue for two
crop seasons for short duration crops,
V. the installment of principal or interest thereon remains overdue for one
Crop season for long duration crops,
The amount of liquidity facility remains outstanding for more than 90 days,
in respect of a securitization transaction undertaken in terms of guidelines On securitization
dated February 1, 2006.
Vii. 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.

Banks should, classify an account as NPA only if the interest due and
charged during any quarter is not serviced fully within 90 days from the end of the
quarter.

ASSET CLASSIFICATION

Categories of NPAs

Banks are required to classify nonperforming assets further into the following three Categories
based on the period for which the asset has remained nonperforming and the
realisability of the dues:
i. Substandard Assets
ii. Doubtful Assets
iii. Loss Assets
1 Substandard Assets
With effect from 31 March 2005, a substandard asset would be one, which has remained NPA
for a period less than or equal to 12 months. In such cases, the current net worth of the borrower/
guarantor or the current market value of the security charged is not enough to ensure recovery of
the dues to the banks in full. In other words, such an asset will have well defined credit
weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct
possibility that the banks will sustain some loss, if deficiencies are not corrected.

2 Doubtful Assets
With effect from March 31, 2005, an asset would be classified as doubtful if it has remained in
the substandard category for a period of 12 months. A loan classified as doubtful has all the
weaknesses inherent in assets that were classified as substandard, with the added characteristic
that the weaknesses make collection or liquidation in full, – on the basis of currently known
facts, conditions and values – highly questionable and improbable.
3 Loss Assets

A loss asset is one where loss has been identified by the bank or internal or external auditors or
the RBI inspection but the amount has not been written off wholly. In other words, such an asset
is considered uncollectible and of such little value that its continuance as a bankable asset is not
warranted although there may be some salvage or recovery value.

PROVISIONING NORMS

Provisioning basically means that the banks estimate that a particular borrower may not be able
to pay back the loan in full and hence make a provision of the amount they could loose (as in that
won’t be paid back to banks). Banks start creating provisions on a loan given when the borrower
starts defaulting on his repayment installments.

SUBSTANDRD ASSET
 A general provision of 15% on total outstanding should be made without making any
allowance for ECGC guarantee cover and securities available
 The unsecured exposures which are identified as substandard would attract additional
provision of 10% i.e. a total of 25% on total outstanding balance

DOUBTFUL ASSET

PERIOD PROVISION
(secured + unsecured)
Up to 1 years 25% + 100%
1 to 3 years 40% + 100%
More than 3 years 100% + 100%

LOSS ASSET

Loss assets should be written off. If loss assets are permitted to remain in the books for
any reason, 100 percent of the outstanding should be provided for.
TYPES OF NPA

GROSS NPA
Gross NPA is the amount outstanding in the borrowal account, in books of the bank other than
the interest which has been recorded and not debited to the borrowal account. Gross NPA
reflects the quality of the loans made by banks. It consists of all the nonstandard assets like as
sub-standard, doubtful, and loss assets. It can be calculated with the help of following ratio:

Gross NPAs Ratio = Gross NPAs

Gross Advances
NET NPA
Net NPAs is the amount of gross NPAs less (1) interest debited to borrowal and not recovered
and not recognized as income and kept in interest suspense (2) amount of provisions held in
respect of NPAs and (3) amount of claim received and not appropriated.
The Reserve Bank of India defines Net NPA as
Net NPA = Gross NPA – (Balance in Interest Suspense account + DICGC/ECGC claims
received and held pending adjustment + Part payment received and kept in suspense account +
Total provisions held).
IT show that actual burden of the bank
It can be calculated by following: Net NPAs = Gross NPAs – Provisions
Gross Advances - Provisions

REASONES OF NPA
Two types of factor are responsible for rising NPA
1. Internal factor:
a) Lack of pre and post credit supervision.
b) Loan again given to defaulter persons
c) Compulsory loan given to priority sector
d) Lack of close monitoring system with borrower.
e) Political pressure on credit decision.
f)Loan given to not eligible buyer who does not fulfill the cateria of loan process.
g) s

External factor :
a) Negligible legal system
b) Time consuming recovery process by courts
c) Willful defaulter
d) Loan are using for another pupose
e) Political pressure on debt relief
f) Natural climates
g) Facing heavy losses the borrower s firm
h) Not pay the first installment in the case of term loan
i) Stock statement or balance sheet are not submitted by borrower firm
j) Changing Govt policies
IMPACT OF NPA

1. Increasing the level of the NPA in bank are also affected their profitability of bank.
2. High NPA are also affected the liquidity of bank.
3. High NPA also affected the goodwill or brand image of the bank.
4. High NPA also affected the wealth of the shareholder of the bank.
5. Increasing NPA also affect the risk facing ability of the bank.
6. NPA causes also affect the Capital aducacy ratio of the bank.
7. it’s also decrease the market share in share market.
[Link] cause also affected the financial condition of the bank.
9. IT also affected the return on investment of the bank.
10. Asset and liability mismatch will widen.

REAERCH MEHODOLOGY
It is a descriptive study done by taking secondary data. Ratio analsis of NPA has been used in
this study. It is analytical study having 5 years data of bank [Link] this study we are using
a Top 5 private sector bank. Private bank is HDFC,AXIS,ICICI,INDUSLAND,KOTAK
MAHINDRA BANK. For getting data we are using annual reports of the bank and using money
control and RBI notifications.

PROBLEM STATEMENT

Nowdays there is huge problem of NPA on banks which is block huge amount of money. I want
to check which of one is better among top 5 private banks and from it I want to see which bank
sector perform better for managing their NPA either Public sector bank and private sector bank.
Which bank control their NPA very good way.

OBJECTIVE

1. To study the trend of NPA in top 5 Private sector bank in India And evaluate their
performance by using NPA Ratio.

2. To give the meaningful recommendation to tackle this problem

3. To study the reasons and impact of NPA in banking sector

4. To compare the net profit and net NPA private sector bank

TABLE 3 GROSS AND NET NPA OF PRIVATE SECTOR BANK

 HDFC BANK AXIS BANK ICICI BANK
YEARS GNPA GNPA% NNPA NNPA% GNPA GNPA% NNPA NNPA% GNPA GNPA% NNPA NNPA%

2012-13 2334.6 0.97 468.95 0.20 2393.42 1.06 704.13 0.32 9607.75 3.22 2230.56 0.77
4
2013-14 2989.2 1.00 820.03 0.30 3146.41 1.22 1024.62 0.40 10505.84 3.03 3297.96 0.97
8
2014-15 3438.3 0.90 896.28 0.20 4110.79 1.34 1316.71 0.44 15094.69 3.78 6255.53 1.61
8
2015-16 4392.8 0.94 1320.37 0.28 6087.51 1.67 2522.14 0.70 26720.93 5.21 13296.75 2.67
3
2016-17 5885.6 1.05 1843.99 0.33 21280.48 5.04 8626.55 2.11 42551.54 7.89 25451.03 4.89
6
AVG 3808.1 0.97 1069 0.26 7403.72 2.06 2838.83 0.794 20896.15 4.626 10106.36 2.182
5

INDUSLAND BANK KOTAK MAHINDRA BANK

YEARS GNPA GNPA% NNPA NNPA% GNPA GNPA% NNPA NNPA%
2012-13 860.64 0.91 355.50 0.38 758.11 1.55 311.41 0.64
2013-14 899.01 0.90 369.16 0.37 1059.44 1.98 573.56 1.08
2014-15 971.62 0.94 400.70 0.39 1237.23 1.85 609.08 0.92
2015-16 1054.87 0.93 438.91 0.39 2838.11 2.36 11261.96 1.06
2016-17 1271.68 1.09 508.26 0.44 3578.61 2.59 1718.07 1.26
AVG 1011.564 0.954 414.506 0.394 1894.3 2.066 2894.816 0.992

Analsis of data:

In this analsis we are using some observation meaning of this observation

1. GNPA- Gross non performing asset

2. % GNPA- Percentage of Gross non performing asset to Gross advance
3. NNPA- NET non performing asset
4. %NNPA- Percentage of NET Non performing asset to Net advance

Graph1 GNPA % OF TOP 5 PRIVATE BANK IN INDIA

9
8
7
6
HDFC
5 AXIS
4 ICICI
INDUSLAND BANK
3 KOTAK MAHINDRA BANK
2
1
0
2012-13 2013-14 2014-15 2015-16 2016-17
 From the above analysis it clearly observed that the INDUSLAND BANK having a lowest average
GNPA Ratio(0.954) as compare to other 4 bank. Their GNPA Ratio increasing but constant rate And
ICICI bank having a highest GNPA Ratio(4.626) among all the bank. HDFC also having 2 nd lowest
GNPA Ratio (0.97).Their GNPA ratio increasing but constant rate. The axis bank GNPA ratio is
increasing at constant rate but after 2015-16 it increase very high rate. The kotak Mahindra GNPA ratio
increasing little high rate after [Link] INDUSLAND and HDFC their asset quality management is
very good as compare to other bank. But on the other side ICICI bank perform not well their npa result
are turning to bad loan are very high rate. Their NPA management is very poor among the private banks.

GRAPH 2 NET NPA% OF TOP 5 PRIVATE BANK

4
HDFC
AXIS
3
ICICI
INDUSLAND BANK
2 KOTAK MAHINDRA BANK

0
2012-13 2013-14 2014-15 2015-16 2016-17

From the above analysis it clearly show that the Avg. NET NPA ratio of HDFC bank is 0.26 lowest
among all four bank. And the ICICI bank having highest NNPA Ratio [Link] actual burden of the
HDFC is very lowest as compare to other their management perform very well. On the other side ICICI
having a highest burden among all other banks.

TABLE NO 2Correlation coefficient between NET NPA and Net Profit (Rs. in Crores)

HDFC AXIS BANK ICICI INDUSLAND BANK KOTAK MAHINDRA

BANK
YEARS NNPA NET PROFIT NNPA NET NNPA NET NNPA NET NET NPA NET
PROFIT PROFIT PROFIT PROFIT

2012-13 468.95 6726.28 704.13 5179.43 2230.56 8325.47 355.50 1061.18 311.41 1360.72
2013-14 820.03 8478.40 1024.62 6217.67 3297.96 9810.48 369.16 1408.02 573.56 1502.52
2014-15 896.28 10215.92 1316.71 7357.82 6255.53 11175.35 400.70 1793.72 609.08 1865.98
2015-16 1320.37 12296.23 2522.14 8223.66 13296.75 9726.29 438.91 2286.45 11261.96 2089.78
2016-17 1843.99 14549.66 8626.55 3679.28 25451.03 9801.08 508.26 2867.89 1718.07 3411.50
Correlation 0.984 -0.627 0.156 0.987 0.143
coefficient
 Correlation coefficient
1.2
1
0.8
HDFC
0.6 AXIS
0.4 ICICI
0.2 INSUSLAND BANK
KOTAK MAHINDRA BANK
0
-0.2
-0.4
-0.6
-0.8

Graph 3. TOP 5 PRIVATE BANKS

From the above analysis clearly show that the NET NPA and NET Profit of HDFC are Highly positively
correlate. And the axis bank is negative correlate but ICICI are low correlate positive. KOTAK
MAHINDRA BANK also correlate low positive. And the INDUSLAND and HDFC BANK are highly
correlate. If we are observed that the Avg. of this the net Profit and NET NPA of Private bank are highly
correlate. It means if there NET NPA increasing the net profit is also increasing. This show the positive
signal.

CONCLUSION

Today there is a big issue for Indian banking industry is to survive in for NPA problem.
Increasing NPA also creates a big problem for profitability of bank. And also broken the interest
of customer who invests the money in their bank. The increasing NPA also great effect on
liquidity of bank. From this study we observed that the NPA of INDUSLAND and HDFC is very
good from the other bank their NPA increasing but constant rate.

SUGGESTION: