A Grand Project on Non Performing Assets Comparative analysis of Private Sector Bank & Public Sector Bank Submitted
to Gujarat University Under the guidance of Ms. Rajeswari Parmar Assistant Professor PARUL INSTITUTE OF BUSINESS ADMINISTRATION BBA PROGRAMME
PREPARED BY: 1. 2. 3. 4. 5. 6. Juhi Patel Mokshesh Chhajed Neetu Dalmia Pratibha Jain Sheetal Sharma Vatsal Kothari
MEANING OF NPA
Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by RBI.
An amount due under any credit facility is treated as "past
due" when it has not been paid within 90 days from the
due date.
CLASSIFICATION OF NPA
A. Standard (Assets): These are loans which do not have any problem are less risk. B .Substandard (Assets): These are assets which come under the category of NPA for a period of less than 12 months. C. Doubtful (Assets): These are NPA exceeding 12 months. D. Loss (Assets): 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.
OBJECTIVES OF THE STUDY
To study the datas of NPAs of last three years in public as
well in private sector banks
To identify the factors affecting NPA To find out the effectiveness of recovery mechanism adopted by banks for NPA
To offer suggestions based on the study To find out the profitability of the banks
LITERATURE REVIEW
Nelson
M. Waweru:
Study that many financial
institutions that collapsed in Kenya Since 1986 due to
non performing loans, this study investigated the causes of non performing loans, the actions that bank managers have taken to mitigate that problem and the level of success of such actions.
CONTD..
Kevin Greenidge, The purpose of this paper is to build a multivariate model, incorporating macroeconomic and bank-specific variables, to forecast non-performing loans in the banking sector of Barbados. On an aggregate level, our model outperforms a simple random Walk model on all forecast horizons, while for individual banks; these
forecasts tend to be more accurate for longer prediction
periods only.
RESEARCH METHODOLOGY
1. Primary Data:
The datas collected were analyzed with the help of questionnaire and these questionnaires are filled by three public banks and three private banks.
The tables are used to represent the consolidated data. The graphical representation is also used for better comprehension and presentation.
2. Secondary Data:
We collected secondary data through RBI website.
POPULATION
There are around 21 public sector banks and 19
private sector banks.
SAMPLE SIZE
We took the sample of three public banks and three private banks.
The public banks which we selected as sample are as follows: SBI Bank Allahabad Bank
Bank of Baroda
The private banks which we selected as sample are as follows:
YES Bank
HDFC Bank
Kotak Mahindra Bank
SAMPLING TECHNIQUE
We
have used Convenient sampling from the non
probability sampling method, which is included in the
types of sampling methods.
DATA ANALYSIS TOOL
We
have use EXCEL as data analysis tool.
DATA ANALYSIS
1. Policy Adopted
Private sector Bank
00
Public Sector Bank 0 0
33.33 IRMD RMP ORM 66.67 IT
33.33
IRMD RMP ORM 66.67 IT
IRMD Integrated Risk Management Division RMP Risk Management Policy ORM Operational Risk Management IT Information Technology
2. Measurement of NPA
Private Sector Bank
0
Public Sector Bank
33.33 EARLY STAGE ALERT STAGE ADVANCE STAGE 66.67
33.33
33.33 EARLY STAGE ALERT STAGE ADVANCE STAGE
33.33
3. Progress in NPA
Private Sector Bank
0 0 POOR
Public Sector Bank
0 0
33.33
SLOW
33.33 POOR SLOW
MODERATE
MODERATE GOOD 66.67
66.67
GOOD
4. Quantum of losses
Private Sector Bank
0 0 0
Public sector bank
0 0 0
LESSTHAN 25% 25-50% 50%-75% ABOVE-75%
LESSTHAN 25% 25-50% 50%-75% ABOVE-75%
100
100
5. Precautions adopted
Private Sector Bank
0 0
Public Sector bank
COLLATERAL GUARANTEE 33.33 GUARANTEE AND ANY OTHER SECURITY 0 COLLATERAL SECURITY MEASURES OTHERS
COLLATERAL GUARANTEE
33.33 GUARANTEE AND ANY OTHER SECURITY 66.67 COLLATERAL SECURITY MEASURES OTHERS 66.67
HYPOTHESES TESTING
We have used F-test calculation as hypotheses testing for the calculation of NPA of both sectors. The datas are of last 3years. The source from where data has been collected is [Link] iba (Indian banking association)
Net NPA calculation of public and private sector banks: 1. Public sector banks (in crore)
BANK Allahabad Bank 2011 736 2012 1092 2013 4172
SBI
BOB Total
12347
791 13874
15819
1544 18455
21956
4192 30320
2. Private sector banks (in crore)
BANK 2011 2012 2013
HDFC
KOTAK
296
211
352
237
469
311
Mahindra
YES Bank Total 9 516 17 606 7 787
H0=There is no significance difference in NPA of public and private sector banks. H1=There is significance difference in NPA of public and private sector banks
F-Test Two-Sample for Variances Public Bank Mean Variance Observations Df F P(F<=f) one-tail F Critical one-tail 20883 72039117 3 2 3781.51478 0.00026437 19 Private Bank 636.3333333 19050.33333 3 2
CONCLUSION
F cal> F tab 3781.51 > 0.00 Here F calculated value is more than the F tabulated value so here Hypotheses is rejected.
So we can say that there is significant difference in net
NPA of public and private sector banks.
FINDINGS
There is an impact of NPA on the profitability of the bank. There is a significant difference in the NPA of public sector and private sector banks.
The main internal factors affecting NPA in private sector banks are : improper credit appraisal, lack of effective follow-up , excessive overdraft lending , lack of post
credit supervision.
CONTD..
The main external factors affecting private sector banks are: natural calamities,industrial sickness, business failure.
The main internal factors affecting NPA in public sector banks are : Excessive Overdraft Lending, Lack of Effective Follow-up ,Absence of Security, Obsolete Technology, Willful Default/Fraud.
CONTD..
The main external factors affecting public sector banks are : Natural Calamities, Industrial sickness, Business failure,Labour Problems of Borrowed Firms.
The recovery mechanism adopted by the private sector
banks are as follows : Outsourcing, Recovery Campus,
One-time-settlement Scheme, Self involvement, Corporate Restructuring.
CONTD..
The recovery mechanism adopted by the public sector banks are as follows: One-time-settlement Scheme, Self involvement, Corporate Restructuring, SARFAESI Act.
CONCLUSION
Growing NPAs is one of the biggest problems that the banks are facing today. If proper management of the NPAs is not undertaken it would hamper the efficiency of the banks. If the concept of NPAs is taken very lightly it would be dangerous for the banking sector. The NPAs destroy the current profit and interest income and affect
the smooth functioning of the recycling of the funds.
CONTD..
Banks also redistribute losses to other borrowers by charging higher interest rates. Lower deposit rates and higher lending rates repress savings and financial markets, which in turn hampers the economic growth of the
country. Thus, it is highly essential for the banks to focus
their attention on growth of NPAs and take appropriate measures to regulate their growth.
REFERENCES
1)Retrieved from: [Link] nd and Progress of Banking in India .
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[Link]
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[Link]
CONTD..
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