Study of NPA and their impact on public sector banks

CAPSTONE REPORT

Submitted to Lovely Professional University In partial fulfillment of the requirements for the award of degree of MASTER OF BUSINESS ADMINISTRATION

Submitted by: Group No Q24

Supervisor :

Anil Aswal Atif Ashfaq

RQ2005B64 (11013856) RQ2005B67 (11013908)

Parmeet Mam

Manpreet kaur RQ1703A18 (7440070116) Vikalp Saxena RQ2005B63(11013514)

DEPARTMENT OF MANAGEMENT LOVELY PROFESSIONAL UNIVERSITY PHAGWARA (2012)

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TABLE OF CONTENTS

INTRODUCTION Introduction of Indian Banking Sector Introduction of Public Sector Bank

PAGE No. 3-7 8

CHALLENGES FOR PUBLIC SECTOR BANKS NON PERFORMING ASSETS LITERATURE REVIEW OBECTIVE OF STUDY PUBLIC SECTOR BANK-TOTAL ASSETS,GROSS NPA,NET NPA PUBLIC SECTOR BANK-PROFIT SECTOR WISE CLASSIFICATION OF NPA IMPACT OF NPA ON PUBLIC SECTOR BANKS RATIO ANALYSIS REFERENCES

9-10 11-14 15-20 21-21 22 23-24 25-26 27-28 29-41 42

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INTRODUCTION

BANKING IN INDIA

A bank is a financial institution that provides banking and other financial services. By the term bank is generally understood an institution that holds a Banking Licenses. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making assets. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so-called Non-bank. Banks are a subset of the financial services industry.

The word bank is derived from the Italian banca, which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Moneylenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table.

Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset. Development of banking industry in India followed below stated steps.

Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to rates of interest.

Banking in India has an early origin where the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of the East India Company, was the turn of the agency houses to carry on the banking business. The General Bank of India was first Joint Stock Bank to be established in the year 1786. The others which followed were the Bank Hindustan and the Bengal Bank.

In the first half of the 19th century the East India Company established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks
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also known as Presidency banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established in 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken by the newly constituted State Bank of India.

The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve Bank of India Act, 1934 which was followed up with the Banking Regulations in 1949. These acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing, supervision and control of banks. Considering the proliferation of weak banks, RBI compulsorily merged many of them with stronger banks in 1969.

The three decades after nationalization saw a phenomenal expansion in the geographical coverage and financial spread of the banking system in the country. As certain rigidities and weaknesses were found to have developed in the system, during the late eighties the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level committee was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial system. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the banking system was introduced in 1992-93. The objective of the reform measures was to ensure that the balance sheets of banks reflected their actual financial health. One of the important measures related to income recognition, asset classification and provisioning by banks, on the basis of objective criteria was laid down by the Reserve Bank. The introduction of capital adequacy norms in line with international standards has been another important measure of the reforms process.

1. Comprises balance of expired assets, compensation and other bonds such as National Rural Development Bonds and Capital Investment Bonds. Annuity certificates are excluded. 2. These represent mainly non- negotiable non- interest bearing securities issued to International Financial Institutions like International Monetary Fund, International Bank for Reconstruction and Development and Asian Development Bank. 3. At book value. 4. Comprises accruals under Small Savings Scheme, Provident Funds, Special Deposits of NonGovernment

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 In the post-nationalization era, no new private sector banks were allowed to be set up. However, in 1993, in recognition of the need to introduce greater competition which could lead to higher productivity and efficiency of the banking system, new private sector banks were allowed to be set up in the Indian banking system. These new banks had to satisfy among others, the following minimum requirements:

(i) (ii)

It should be registered as a public limited company; The minimum paid-up capital should be Rs 100 crore;

(iii) The shares should be listed on the stock exchange; (iv) The headquarters of the bank should be preferably located in a centre which does not have the headquarters of any other bank; and (v) The bank will be subject to prudential norms in respect of banking operations, accounting and other policies as laid down by the RBI. It will have to achieve capital adequacy of eight per cent from the very beginning.

A high level Committee, under the Chairmanship of Shri M. Narasimham, was constituted by the Government of India in December 1997 to review the record of implementation of financial system reforms recommended by the CFS in 1991 and chart the reforms necessary in the years ahead to make the banking system stronger and better equipped to compete effectively in international economic environment. The Committee has submitted its report to the Government in April 1998. Some of the recommendations of the Committee, on prudential accounting norms, particularly in the areas of Capital Adequacy Ratio, Classification of Government guaranteed advances, provisioning requirements on standard advances and more disclosures in the Balance Sheets of banks have been accepted and implemented. The other recommendations are under consideration.

The banking industry in India is in a midst of transformation, thanks to the economic liberalization of the country, which has changed business environment in the country. During the pre-liberalization period, the industry was merely focusing on deposit mobilization and branch expansion. But with liberalization, it found many of its advances under the non-performing assets (NPA) list. More importantly, the sector has become very competitive with the entry of many foreign and private sector banks. The face of banking is changing rapidly. There is no doubt that banking sector reforms have improved the profitability, productivity and efficiency of banks, but in the days ahead banks will have to prepare themselves to face new challenges.

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CLASSIFICATION OF SCHEDULED BANKING STRUCTURE IN INDIA

The scheduled banks are divided into scheduled commercial banks and scheduled co operative banks. Further scheduled commercial banks divided into the Public Sector Banks, private sector banks, foreign banks, and regional rural banks. Whereas scheduled co-operative banks are classified into scheduled urban co operative and scheduled state co- operative.RBI has further classified public sector banks into nationalized banks, state bank of India and its subsidiaries. And private banks have been classified into old and new private sector banks. As far as the number is concerned, total public sector banks are 27, private sector banks are 30, foreign banks are 36, and regional rural banks are 196. Thus in scheduled commercial bans, the regional rural banks are on the top number.In the scheduled co-operative banks, there are 57 scheduled cooperatives and 16 scheduled co-operative banks. Today the overall commercial banking system in India may be distinguished into:

1. Public Sector Banks 2. private Sector Banks 3. Co-operative Sector Banks 4. Development Banks

PUBLIC SECTOR BANKS a. State Bank of India and its associate banks called the State Bank group b. 20 nationalised banks c. Regional Rural Banks mainly sponsored by Public Sector Banks

PRIVATE SECTOR BANKS

a. Old generation private banks b. New generation private banks c. Foreign banks in India d. Scheduled Co-operative Banks e. Non-scheduled Banks

CO-OPERATIVE SECTOR
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The co-operative banking sector has been developed in the country to the supplement the village money lender. The co-operatiev banking sector in India is divided into 4 components 1. State Co-operative Banks 2. Central Co-operative Banks 3. Primary Agriculture Credit Societies 4. Land Development Banks 5. Urban Co-operative Banks 6. Primary Agricultural Development Banks 7. Primary Land Development Banks 8. State Land Development Banks

DEVELOPMENT BANKS 1. Industrial Finance Corporation of India (IFCI) 2. Industrial Development Bank of India (IDBI) 3. Industrial Credit and Investment Corporation of India (ICICI) 4. Industrial Investment Bank of India (IIBI) 5. Small Industries Development Bank of India (SIDBI) 6. SCICI Ltd. 7. National Bank for Agriculture and Rural Development (NABARD) 8. Export Import Bank of India 9. National Housing Bank

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PUBLIC SECTOR BANKS

Before the independence, the banking system in India was primarily associated with urban sector. After independence, the banks had to spread out into rural and unbanked areas and make credit available to the people of those areas. In 1969 the government nationalized 14 major commercial banks. Still the wide disparities continued. To reduce the disparities the government nationalized 6 more commercial banks in 1980 government came to own 28 banks including SBI and its 7 subsidiaries. Today, we are having a fairly well developed banking system with different classes of bankspublic sector banks, foreign banks, and private sector banks-both old and new generation.

In July 1993, New Bank of India was merged with Punjab National Bank. Now, there are 25 banks in the public sector viz. State Bank of India and its 5 associates, 19 commercial banks exclusive of Regional Rural. In terms of sheer geographical spread, the public sector system is the largest. The statistics are as follows: a network of 64000,branches-one branch for every 14000 Indian with over 64 crores customers. This labour intensive network has built-in cost, which makes the public sector banks inherently uncompetitive. Reduction of branches to achieve cost saving has not received a munch thrust as it should. Public sector banks are characterized by mammoth branch network, huge work force, relatively lesser mechanization, and huge volume but of less value business transactions, social objectives and their own legacy system and procedures. Improving profitability in general requires efforts in several directions, i.e. cutting in cost, improving productivity, better recovery of loan and to reduce high level of NPAs. The public sector banks have to build up the cost-benefit culture in their operations. When there is a thin margin in banking operation, the public sector banks in India have to increase the turnover. Previously, Indian banks were relying on high credit deposit ratio. Now, the Indian banks have to depend on the volume of high business turnover. The returns on assets have to be improved. Further, the PSBs in Indian have to compare them with the highly profitable bank with regards to operating expenses. They have to ensure that each every account is profitable and product should be such, while generates more profit.

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CHALLENGES FOR THE PUBLIC SECTOR

Indian banks functionally diverse and geographically widespread have played a crucial role in the socio-economic progress of the country after independence. Growth of large number of medium and big industries and entrepreneurs in diverse fields were the direct results of the expansion of activities of banks. The rapid growth, forever lead to strains in the operational efficiency of the banks and the accumulation of non-performing assets (NPAs) in their assets portfolio. The uncomfortably high level of NPAs of banks however is a cause for worry and it should be brought down to international acceptable levels for creating a vibrant and competitive financial system. NPAs are serious strains on the profitability of the banks as they cannot book income on such accounts and their funding cost provision requirement is a charge on their profit. Although S & P cited as a reasons for mounting of NPAs priority sector lending, outdated legal system which notonly encourages the incidence of NPAs but also prolongs their existence by placing a premium on default and delay in finalization of rehabilitation packages by the Board for Industrial and Financial Reconstruction are some of the major causes for the rising of NPAs. The following deficiencies were noticed in the managing Credit Risk: The absence of written policies. The absence of portfolio concentration limits. Excessive centralization or decentralization of lending authorities. Cursory financial analysis of borrower. Infrequent customer contact. Inadequate checks and balances in credit process The absence of loan supervision A failure to improve collateral position as a credit deteriorate Excessive overdraft lending. Incomplete credit files The absence of the assets classification and loan-loss provisioning standards A failure to control and audit the credit process effectively.

There are 26 banks in the public sector viz. State Bank of India and its 6 associates,20 commercial banks exclusive of Regional Rural. Following are the 26 public sector banks.

1. Allahabad Bank 2. Andhra Bank 3. Bank of Baroda 4. Bank of India

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5. Bank of Maharashtra 6. Canara Bank 7. Central Bank of India 8. Corporation Bank 9. Dena Bank 10. Indian Bank 11. Indian Overseas bank 12. Punjab National Bank 13. Punjab and Sind Bank 14. Syndicate Bank 15. UCO Bank 16. Union Bank of India (UBI) 17.Vijaya Bank 18. Oriental Bank of commerece 19. IDBI Bank

State Bank of India

State Bank of India & its associates.

1) State Bank of Hyderabad 2) State Bank of India 3) State Bank of Mysore 4) State Bank of Travancore

Deposits
Total deposits mobilized by the Public Sector Banks as at the end March 2011 stood at Rs. 38,72,483 crore showing a growth of 15.77% which is higher than growth rate of end March 2010.

Investment
During 2010-2011, investment was Rs. 1078103 crore in india by public sector bank.

Credit
The rate of growth in the total loan disbursement by the banking sector was lower during 2010-11 due largely to lower economic activity. The total assets and advances position as at end March 2011 stood at Rs. 2920408 crore of the public sector bank.
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NON-PERFORMING ASSETS
The world is going faster in terms of services and physical products. However it has been researched that physical products are available because of the service industries.In the nation economy also service industry plays vital role in the boosting up of theeconomy. The nations like U.S, U.K, and Japan have service industries more than 55%.The banking sector is one of appreciated service industries. The banking sector plays larger role in channelising money from one end to other end. It helps almost every person in utilizing the money at their best. The banking sector accepts the deposits of the people and provides fruitful return to people on the invested money. But for providing the better returns plus principal amounts to the clients; it becomes important for the banks to earn the main source of income for banks are the interest that they earn on the loans that have been disbursed to general person, businessman, or any industry for its development. Thus, we may find the input-output system in the banking sector. Banks first, accepts the deposits from the people and secondly they lend this money to people who are in the need of it. By the way of channelising money from one end to another end, Banks earn their profits.However, Indian banking sector has recently faced the serious problem of Non Performing Assets. This problem has been emerged largely in Indian banking sector since three decade. Due to this problem many Public Sector Banks have been adversely affected to their performance and operations. In simple words Non Performing Assets problem is one where banks are not able to recollect their landed money from the clients or clients have been in such a condition that they are not in the position to provide the borrowed money to the banks. The problem of NPAs is danger to the banks because it destroys the healthy financial conditions of the them. The trust of the people would not be anymore if the banks have higher NPAs. So. The problem of NPAs must be tackled out in such a way that would not destroy the operational, financial conditions and would not affect the image of the banks. recently, RBI has taken number steps to reduce NPAs of the Indian banks. And it is also found that the many banks have shown positive figures in reducing NPAs as compared to the past years.

MEANING OF NPAS
An asset is classified as non-performing asset (NPAs) if the borrower does not pay dues in the form of principal and interest for a period of 180 days. However with effect from March 2004, default status would be given to a borrower if dues were not paid for 90 days. If any advance or credit facilities granted by bank to a borrower become non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any regard to the fact that there may still exist certain advances / credit facilities having performing status. Action for enforcement of security interest can be initiated only if the secured asset is classified as Non Performing Asset. Non Performing Asset means an asset or account of
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borrower, which has been classified by a bank or financial institution as substandard, 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 30 days from the due date. Due to the improvement in the payment and settlement systems, recovery climate,upgradation of technology in the banking system, etc., it was decided to dispense with 'past due' concept, with effect from March 31, 2001.Accordingly, as from that date, a Non performing asset (NPA) shell be anadvance where Interest and /or installment of principal remain overdue for a period of more than 180 days in respect of a Term Loan The account remains 'out of order' for a period of more than 180 days, in respect of an overdraft/ cash Credit (OD/CC) The bill remains overdue for a period of more than 180 days in the case of bills purchased and discounted Interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose Any amount to be received remains overdue for a period of more than 180 days in respect of other accounts.With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the '90 days overdue' norm for identification of NPAs, form the year ending March 31, 2004. Accordingly, with effect form March 31, 2004, a nonperforming asset (NPA) shell be a loan or an advance where : Interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan The account remains 'out of order' for a period of more than 90 days, in respect of an overdraft/ cash Credit (OD/CC) The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted Interest and/ or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.

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ASSET CLASSIFICATION
Categories of NPAs

Standard Assets:

Standard assets are the ones in which the bank is receiving interest as well as the principal amount of the loan regularly from the customer. Here it is also very important that in this case the arrears of interest and the principal amount of loan do not exceed 90 days at the end of financial year. If asset fails to be in category of standard asset that is amount due more than 90 days then it is NPA and NPAs are further need to classify in sub categories. Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained non-performing and the reliability of the dues: ( 1 ) Sub-standard Assets ( 2 ) Doubtful Assets ( 3 ) Loss Assets

( 1 ) Sub-standard 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 month. The following features are exhibited by substandard assets: the current net worth of the borrowers / guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full; and the asset has welldefined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.

( 2 ) Doubtful Assets

A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard, 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. With effect from March 31, 2005, an asset would be classified as doubtful if it remained in the sub-standard category for 12 months.

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( 3 ) Loss Assets

A loss asset is one which 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. Also, these assets would have been identified as loss assets by the bank or internal or external auditors or the RBI inspection but the amount would not have been written-off wholly.

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REVIEW OF LITERATURE
Goven (1993) in his article, NPAs on account of priority sector lending, it was pointed out that there may be only a marginal difference in the NPAs of banks lending to priority sector and the banks lending to private corporate sector. Against this background, the study suggests that given the deficiencies in these areas, it is imperative that banks need to be guided by fairness based on economic and financial decisions rather than system of conventions, if reform has to serve the meaningful purpose. Experience shows that policies of liberalization, deregulation and enabling environment of comfortable liquidity at a reasonable price do not automatically translate themselves into enhanced credit flow. Although public sector banks have recorded improvements in profitability, efficiency (in terms of intermediation costs) and asset quality in the 1990s, they continue to have higher interest rate spreads but at the same time earn lower rates of return, reflecting higher operating costs. Pati (1999) studied the causes and consequences of NPA in Indian banks & suggested the cure of large NPAs. It was revealed that the main cause of NPA is non linkage of lending with productive investment and recovery with product sale. The study examined that large NPA hinders the profitability and viability of the banks. It was suggested that improved recovery mechanism and credit management is the way out to minimize NPA.

Dong (2002) Analyzed that the nature of NPAs in the Indian Banking system and discussed the key design features that would be important for the assets reconstruction company to resolve NPAs problem. The emphasis was put on recent regional and cross country experience in dealing with impaired assets during period of financial crises. Prashant k reddy (2002) in this article he talks about the financial sector reform in india which has progressed rapidly on aspects like interest rate deregulation ,reduction in reserve requirements, barriers to entry, prudential norms & risk based supervision but the progress on the structural-institutional aspects has been much slower and is a cause for concern. It tells about what changes are required to tackle the NPA problem. This paper also deals with the experiences of other Asian countries in handling of NPAs. It also suggests mechanisms to handle the problem by drawing on experiences from other countries

desai (2002) in his book titled, "Managing Non-Performing Assets in Banks," highlighted that banks are concerned with their heavy NPA portfolio which was impairing their profitability and are taking all possible steps to contain the same. Banks have achieved a reasonable degree of success to bring down their existing NPAs but due to heavy slippage of standard accounts to NPA category the overall position continued to deteriorate. The main reasons responsible for such a situation include - slow economic and industrial growth, slump in capital market, financial indiscipline, Willful defaults by the borrowers, overburdened and slow judiciary, competition faced by local industries from the multi-nationals, lack of support to the borrowers from the banks at the time of the need, etc. In this book, the author has made an effort to deal with the practical aspects of the problem of management of NPAs right from identification stage till recovery of the dues including other aspects connected with the subject like asset classification, assessment of provision, pre-sanction appraisal and post-sanction appraisal and post sanction supervision, monitoring system for existing and likely NPAs, capital adequacy, reduction of NPAs, rehabilitation of sick nonperforming units etc.
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Muniappan (2002) examined the impact of NPA on banks profits and lending ability. He analysed the measures initiated by reserve bank and Government of India for reduction of NPA and suggested that NPA can be avoided at the initial stage of credit consideration by putting in place rigorous and appropriate credit appraisal mechanism. Rajput (2003) in his thesis titled, "Banking Sector Reforms in India - A study of Post-Liberalization Period", highlighted that decade of nineties in last century brought revolution in Indian banking sector. Banks were made free from the clutches of hefty regulations and allowed to decide their own fate. Author suggested that Indian banks especially public sector banks will have to learn to live up with competitive environment. They must make persistent efforts to improve their profitability. On the revenue side, they should increase noninterest income by diversifying their operation into Para banking activities on the lines of new private banks. On the expenditure side, they must bring efficiency in their operations to minimize cost and strive hard to control the booming NPAs. Kumar (2003) in his paper titled, "The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002", discussed in detail the need, process, summary, positive as well as negative aspects of the Act. He analyzed that this Act empowered banks and financial institutions to directly enforce the security interest which was pledged to them at the time of sanctioning the loan without going through the judicial process of DRT or Civil Courts. Ranjan & Dhal (2003) In this study they do the analysis of commercial banks' nonperforming assets(NPAs) in the Indian context. The empirical analysis evaluates as to how banks non-performing assets are influenced by three major sets of economic and financial factors, i.e., terms of credit, bank size induced risk preferences and macroeconomic shocks. The empirical results from panel regression models suggest that terms of credit variables have significant effect on the banks' non-performing assets in the presence of bank size induced risk preferences and macroeconomic shocks. Moreover, alternative measures of bank size could give rise to differential impact on bank's non-performing assets. In regard to terms of credit variables, changes in the cost of credit in terms of expectation of higher interest rate induce rise in NPAs. On the other hand, factors like horizon of maturity of credit, better credit culture, favourable macroeconomic and business conditions lead to lowering of NPAs. Business cycle may have differential implications adducing to differential response of borrowers and lenders. Misra (2003) in his article, "Managing Non-Performing Assets: A Professional Approach", highlighted that the profitability of the financial institutions largely depended upon the level of income generated through optimum use of the assets after paying the cost of fund for acquiring them and other administrative costs involved therein. Redefined objective of managing NPAs through profit maximization approach and risk management approach were suggested. The author further concluded that the high rise in gross and net NPAs of the banking sector in the recent past was at an exponential rate giving an indication that present ongoing recession was taking a heavy toll on corporate credit discipline. Mukherjee (2003) made an attempt to draw some policy conclusions from the international experiences regarding the resolution of the problem of old bad debts. International experiences suggest that different countries adopted mainly two types of strategies via the formation of Asset Management Companies and the strategy of decentralized restructuring. Khan and Singh (2005) in their Report on "Effectiveness of DRTs in Recovery of Bank Dues, have evaluated the performance of DRTs in recovery of bank dues during the years 1996 to 2004. They have highlighted major defects in DRT system and also gave recommendations to overcome them. They have concluded that the DRTs were effective in recovery of banks' dues to a certain extent and would become more effective, provided the given suggestions were implemented in letter and spirit. Saggar (2005) in her research book titled, " commercial Banks in India", stated that it has been found over the years that the performance of banking sector has been a mixed one i.e. strong in widening the business coverage but weak in terms of sustainability and viability. Overtime, the viability particularly of a number of
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public sector banks has become a matter of great concern. According to author, profitability of banks is influenced by a combination of factors such as quality of asset-liability management, productivity levels, operating costs, organisational culture and most critical issue in present context, i.e., the non-performing assets (NPAs). She concluded that the public sector banks should move from deposit orientation to profit orientation. Profit plans should be developed to help them in recasting their cost estimates for their activities. Khasnobis (2005) in his article, NPAs Emerging Challenges in India studied that the Indian banking sector has played a commendable role in fuelling and sustaining growth in the economy. In the recent past a large part of the banking sectors growth has been on the back of financing consumption, as reflected in the growth of retail banking. While the progress on this front is likely to continue, sustaining this growth in the coming years may require focus on the supply side capacity building. A growth driver in this phase would involve financing the emerging Small & Medium Enterprises (SMEs) sector of the economy. As such, banks would have to gear up for the challenges of managing growth and consequent risks in the SME sector financing. Addressing this issue and putting in place a suitable risk mitigation mechanism is going to be a fairly daunting challenge. One way of ensuring focus would be to free up capital both financial and human and make them available for sustaining the growth in assets and profitability. Farming out the banks NonPerforming Assets (NPAs) portfolio to asset recovery companies, which specialize in this segment of the financial sector, could be an option worth evaluating. Kumar (2005) in his article, Non-Performing Assets in Indian Banks studied that the Indian banking sector faced a serious problem of NPAs. The extent of NPAs has comparatively higher in public sectors banks. To improve the efficiency and profitability, the NPAs have to be scheduled. Various steps have been taken by government to reduce the NPAs. It is highly impossible to have zero percentage NPAs. But at least Indian banks can try competing with foreign banks to maintain international standard. Bose (2005) in his research paper, " SERFAESI Act: An Effective Recovery Tool", elaborated while there have been several schemes in the past to facilitate the recovery from NPAs, the success of such efforts in terms of NPAs reduction has been far from satisfactory. SERFAESI Act, it was hoped, would greatly help banks in their efforts to reduce and recover money from NPAs. Nonetheless, the recent developments have also brought out the limitations of the Act, thereby creating apprehensions amongst banks and financial institutions. Notwithstanding this, to take full advantage of the Act, the cool causes of NPAs, which were evident in the system, may have to be addressed first. The author has made an attempt to provide a glimpse of the SERFAESI Act against this backdrop. Raul(2005) discussed about the securitization act 2002 that facilitated that the investors to deploy the funds in non-performing asset portfolio of banks and financial institution.

Chugh (2005),in his research book titled, " Indian baking today-Impact of Reforms", has attempted to investigate whether new private sector banks were serving properly to different segments of the economic sectors of India specially to economically weaker sector of the society or not and were the employees of these banks satisfied. Some other important parameters such as assets size, level of NPAs, interest and other incomes etc. were selected to make comparison between new private sector banks and public sector banks. Impact of economic reforms on banking sector has also been examined in the study. He concluded that public sector banks were coming up fastly to meet the challenges of open competition in financial markets in India. They were adopting latest banking technologies day by day and providing quality services to their respective customers at lower cost. Harpreet (2006) in her thesis titled Credit management and problem of NPAs in Public Sector Banks highlighted the problem of non-performing assets in public sector banks. Various developments in the banking sector in India have been analyzed by studying the growth of banking sector in Pre-and Post Independence era. The study has covered the prudential norms given by RBI and also analyzed the NPA management policies of public sector banks. Viewpoints of the managers regarding problem of NPAs have also been studied by selecting 120 managers from various branches of public sector banks in Punjab.
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Perceptions of borrowers contributing to NPAs have also been studied by selecting 100 defaulters from public sector banks in Punjab. Author suggested that for effective handling of NPAs, there is an urgent need for creating proper awareness about the adverse impact of NPAs on profitability amongst bank staff, particularly the field functionaries. Bankers should have frequent interactions and meeting with the borrowers for creating better understanding and mutual trust. B Krishna Reddy & P Premchand Babu & V Mallikarjuna & P Viswanath(2006)is trying to show the investigation trends in non performing assets,sectoral composition of NPAs, asset quality diagnosis and the scenario of NPAs at the bank level.And they are also focus on scenario when the scnerio is change the operations of Public Sector Banks (PSBs), Non-performing Assets (NPAs) have been the most vexing problem faced by PSB.

Michael(2006) examined how NPA in the loan portfolio affects the operational efficiency of the central cooperative banks. The study aimed to check the factors of non-performing assets of the banks. The study suggested that prompt, preventive and curative measures can curb the menace of NPA's. Kumar (2006) in his research book titled, "Banking Sector Efficiency in Globalize Economy," highlighted that the performance of the banks both in the public and private sectors has become more market driven with growing emphasis on better performance. Author has explored the broad structure of banking system in India, analyzed the overall efficiency of the system in terms of financial parameters into two components: technical efficiency and allocation efficiency. He concluded that the much-publicized fact that public sector banks are inefficient is based on a piecemeal analysis in the form of simple, static, partial and isolated ratios having some hidden and often misconceived assumptions about the structure. The study concluded that there was an urgent need of the time to go in for this kind of system wide analysis to explore the intricacies of the complex system. Murali and Krishna (2006) in their paper, "Ensuring Qualitative Credit Growth through Effective Monitoring of Advances", observed that there has been a spirit in the lending activity of banks, in the recent past. This is due to two factors, viz. availability of huge surplus funds with the banks and the losses suffered by the banks in investment and treasury activities. While credit growth is needed for survival, it is imperative to ensure that the credit growth does not result in nonperforming advances later. For this banks have to resort to effective pre-disbursement as well as post-disbursement monitoring. The authors concluded that negligence in monitoring a loan was less excusable than an error at the appraisal stage. Bhatia (2007) in his research paper entitled, Non-Performing Assets of Indian Public, Private and Foreign Sector Banks: An Empirical Assessment, explores an empirical approach to the analysis of Non-Performing Assets (NPAs) of public, private, and foreign sector banks in India. The NPAs are considered as an important parameter to judge the performance and financial health of banks. The level of NPAs is one of the drivers of financial stability and growth of the banking sector. This paper aims to find the fundamental factors which impact NPAs of banks. A model consisting of two types of factors, viz., macroeconomic factors and bank-specific parameters, is developed and the behavior of NPAs of the three categories of banks is observed. Karunakar (2008) in his article, Are non - Performing Assets Gloomy or Greedy from Indian Perspective? has discussed that the economic reforms initiated by the then finance minister and present prime minister of India Dr. Manmohan Singh would have been remained incomplete without the overhaul of Indian banking sector. The problem of losses and lower profitability of Non-Performing Assets (NPAs) and liability mismatch in banks and financial sector depend on how various risks are managed in their business. An attempt is made in the paper that what are NPAs? The factors contributing to NPAs, the magnitude of NPAs, reasons for high NPAs and their impact on Indian banking operations. Besides capital to risk weightage assets ratio of public sector banks, management of credit risk and measures to control the menace of NPAs are also discussed. The lasting solution to the problem of NPAs can be achieved only with proper credit
18 | P a g e

assessment and risk management mechanism. It is better to avoid NPAs at the market stage of credit consolidation by putting in place of rigorous and appropriate credit appraisal mechanisms. Mohit Kakkar (2008 -2010)explained that the non-performing assets in banks has assumed great importance. While gross NPA reflects the quality of the assets made by banks, net NPA shows the actual burden of banks. Now it is increasingly evident that the major defaulters are the big borrowers coming from the nonpriority sector. The banks and financial institutions have to take the initiative to reduce NPAs. Public sector banks figure prominently in the debate not only because they dominate the banking industries, but also since they have much larger NPAs compared with the private sector banks. This raises a concern in the industry and academia because it is generally felt that NPAs reduce the profitability of banks, weaken its financial health and erode its solvency. Goyal kanika(2010)talk about the public sector banks and their importance in banking sector because public sector banks covers the 82 % of share in the total deposit. In this she talks about that many provision has to be taken to improve the efficiency of banks and trim down NPA to improve the financial health of the banks. The study observed increase in gross as well as net NPAs in absolute terms and improved asset quality of banks. The public sector banks have managed its assets proficiently; however, the study observes that increased NPA's in the agriculture sector is a matter of great concern. Saluja(2010) compared the performance of public and private sector banks and in foreign banks in India with special reference to their non-performing assets. The objective of the study to evaluate NPAs i.e. Gross and Net in different banks. The study made a comparative analysis of NPAs of public, private and foreign banks. The study concludes that there is a huge difference in NPAs of public, private and foreign banks. Mallick, Soumitra K(Apr 2010) talks about the Non-performing assets (NPAs) are an important measure of the success of these businesses, as well as of their levels of discretion in carrying out their commercial activities conditional on their role in developing India's entrepreneurship outside the stock markets. In this article we analyze certain properties of NPAs in Indian Banks over the 1990s . They are provided three conclusions for emerging India's banking sector. First, NPAs (as a ratio of loans and advances) are significantly sticky over time. Second, larger NPAs are associated with larger advances and vice-versa. Third, NPAs do not seem to have spiraled out of control over the 1990s. A simple co-integration test is carried out and a set of dynamic graphs, using notions of fibration, is presented to support the results.

Arpita (2010) are NPA gloomy from Indian perspective explained that In the global economy prevailing today, the vulnerability of Indian businesses has increased. A culture change is crept in where repayment of bank loans is no longer assured. A constant follow up action and vigil are to be exercised by the operating staff. Diversion of funds and willful default has become more common. The challenges before the banks in India today are the raising NPAs in the retail sector, propelled by high consumerism and lowering of moral standards. The NPAs have deliterious impact in the interest income on the bank, bank profitability because of the providing of the doubtful debts, return on investment of course. NPAs also disturb the Capital Adequacy Ratio (CAV) and economic value addition (EVR) of the banks. It is due to above factors, the public sector banks are faced with bulging NPAs which results in lower income and higher provisioning for doubtful debts and it will make a dent in their profit margin

Radhika(2011) studied the trends in NPAs of Indian banks and makes a comparison of public sector banks, old private sector banks, new private sector banks and foreign banks. She made an attempt to establish
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relationship between net profit and NPAs and total advances. The impact of NPAs on net profit and impact of total advances on NPAs was also examined.

Kajal & Monika (2011)They have used statistical tools for projection of trend and to make a comparative analysis of services of Public sector Banks and Private Sector banks. Increased competition, new information technologies and thereby declining processing costs, the erosion of product and geographic boundaries, and less restrictive governmental regulations have all played a major role for Public Sector Banks in India to forcefully compete with Private and Foreign Banks. this paper an attempt to analyze how efficiently Public sector banks have been managing NPA. Yadav(2011) This paper deals with the concept of non-performing assets, its magnitude and impact. One fourth credit of total advances was in the form of doubtful asset in the initial year of the nineties and has an adverse impact on profitability of public banks at aggregate or sectoral level indicating high degree of riskiness in credit portfolio and raising question mark on the credit appraisal. The profitability of all public sector banks affected at very large extent when non-performing assets (NPAs) work with other banking strategic variables and also affect productivity and efficiency. Shantanu In this they mentioned that 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 nonperforming 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 theReserve Bank of India (RBI), a bank cannot book interest on an NPA on accrual basis. In other words,such interests can be booked only when it has been actually received. Therefore, this has become what is called as a critical performance area of the banking sector as the level of NPAs affects the profitability of a bank

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OBJECTIVE OF STUDY
To understand the impacts of NPAs on the operations of the Public Sector Banks. To evaluate the comparative ratios of the Public Sector Banks with concerned to the NPAs.

SCOPE OF STUDY
To study what kind of role NPAs are playing upon the operations of the Bank Judge the performance and financial position of the company when NPA is considered. To know the variables available to control NPAs

RESEARCH DESIGN
Descriptive Research As Descriptive study is conducted with an objective to gain familiarity with the phenomenon or to achieve new insight into it, this study aims to find the impact of NPA on public sector banks SAMPLING DESIGN Universe In this study the universe is finite and will take into the consideration related news and events that have happened in last few year. Sampling Unit: As this study revolves around NPA impact on public sector bank. So the sampling unit is confined to only the Banking. SAMPLING TECHNIQUE: -

Convenient Sampling: Study conducted on the basis of availability of the Data and requirement of the project. Study requires the events that have NPA impact on Public sector banks.

Data collection Method

Secondary data: For the secondary data various literatures, books, journals, magazines, web links are used. As there are not possibilities of collecting data personally so no questionnaire is made.

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Name of Bank 2008-09 Public Sector Bank State Bank of India State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore State Bank of India & its Associates Nationalised Bank Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank IDBI Bank Limited Nationalised Banks Public Sector Banks 97,648.00 68,469.21 2,27,406.73 2,25,501.75 59,030.36 2,19,645.80 1,47,655.24 86,905.80 48,460.52 84,121.74 1,21,073.40 1,12,582.58 40,778.58 2,46,918.62 1,30,255.67 1,11,664.16 1,60,975.51 62,040.72 62,382.61 1,72,402.33 24,85,919.33 37,33,008.46 9,64,432.08 46,370.21 76,722.00 40485.79 69618.53 49460.52 12,47,089.13

total assets 2009-10 2010-11 2008-09

Gross Npa 2009-10 2010-11 2008-09

Net Npa 2009-10 2010-11

10,53,413.74 54,189.68 88,386.02 45408.93 76,076.97 59454.7 13,76,930.04

12,23,736.20 62,954.50 10669.8 52032.46 81286.25 70976.75 15,01,655.96

16345.64 490.34 486.04 367.61 573.90 549.02 18,812.55

17836.30 611.85 645.67 595.26 1006.61 641.98 21,337.67

23073.52 835.40 1150.45 863.74 1381.68 835.23 28,140.02

9677.42 252.94 165.79 129.07 263.63 187.54 10,676.39

10870.17 271.25 271.25 299.79 482.72 350.40 12,545.58

12346.90 341.33 562.72 467.88 620.77 450.99 14,790.59

1,21,699.21 90,342.42 2,78,316.71 2,74,966.46 71,055.79 2,64,741.09 1,82,671.64 1,11,667.30 57,586.58 1,01,389.32 1,31,096.40 1,37,431.00 56,664.88 2,96,632.79 1,39,050.94 1,37,319.47 1,95,161.85 77,011.22 70,222.09 2,33,572.01 30,28,599.17 44,05,529.21

1,51,286.36 1,08,900.73 3,58,397.18 3,51,172.55 76,442.21 3,36,078.76 2,09,757.32 1,43,508.59 70,838.43 1,21,718.31 1,78,784.27 1,61,343.38 68,550.14 3,78,325.25 1,56,538.79 1,63,398.45 2,35,984.44 90,040.53 81,690.63 2,53,376.80 36,96,133.12 51,97,789.08

1078.25 368.14 1842.93 2470.88 798.41 2167.97 2316.55 559.22 620.77 459.18 1923.41 1058.12 161.04 2767.46 1594.54 1539.51 1923.35 1019.56 698.82 1435.69 26,803.80 45,616.35

1220.85 487.87 2196.06 4481.21 1209.79 2504.53 2457.89 650.94 641.99 458.59 3441.66 1468.75 206.15 3214.41 2004.59 1665.02 2663.87 1372.30 994.45 2129.39 35,470.31 56,807.98

1646.98 995.64 2786.23 4356.60 1173.70 2981.78 2394.53 790.23 842.24 720.02 2793.42 1920.54 424.28 4379.39 2589.12 3090.17 3622.82 1355.78 1259.19 2784.73 42,907.39 71,047.41

422.11 79.22 449.04 628.21 271.90 1507.25 1063.00 138.30 313.38 93.81 999.14 442.43 78.03 263.86 631.77 812.67 325.94 525.00 292.29 948.96 10,286.31 20,962.70

470.15 95.72 18.95 2207.45 662.43 1799.70 727.00 197.25 427.53 144.93 1994.97 723.82 116.63 981.69 963.20 966.28 965.33 779.00 581.83 1406.32 16,230.18 28,775.76

736.37 273.68 790.88 1944.99 618.95 2377.43 847.00 397.74 548.95 397.04 1328.42 938.15 237.94 2038.63 1030.84 1824.55 1803.44 757.41 741.16 1677.91 21,311.48 36,102.07

PUBLIC SECTOR BANK-TOTAL ASSETS,GROSS NPA,NET NPA

Total assets :
Total Assets of the Public Sector Banks increased to Rs. 51,97,789.08 crore as on March 2011 from Rs. 44,05,529.21crore of the previous year, showing the growth rate of 17.98% as against the growth rate of 18.01% recorded during the 2009-2010. 20 Nationalised bank registered higher growth than the rate of growth recorded by the Public Sector Banks(State bank) as a group. During the previous year (20092010), 20 Nationalised Banks registered higher growth rate than the growth recorded by this group.

Non Performing Assets :

Both gross NPA & net NPA at the end of march 2011 were higher then the previous year.The gross NPA of pubic sector banks increased to Rs. 71,047.41 crore at the march 2011 from Rs. 56,807.98 crore at the end march 2010.Similarly the net NPA is increase from Rs. 36,102.07crore in march 2011 as compare to the previous year i.e. Rs. 28,775.76 in march 2010.Gross NPA is increase from previous year.
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PUBLIC SECTOR BANKS PROFIT

Table 3: Public Sectors Banks: Profits Name of the Bank 2009 Nationalised Banks Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerece Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of india Vijaya Bank Total of Nationalized Banks State Bank Of India Associates Of SBI State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore Total of 7 Associates of SBI Total of State Bank Group Total Of Public Sector Banks Gross Profit 2010 Provisions and Contigency 2009 2010 2011 Net Profit 2010

2011

2009

2011

8506.65 6140 17849.2 19399.2 4791.58 19430.3 11525.2 7174.57 3877.62 7865.77 11237.2 9927.79 3654.86 22191.9 10440 9141.28 13371.9 4802.73 5936.64 197264 76479.2

9885.1 7337.49 19504.7 20494.62 5326.81 21609.86 13799.55 848103 459899 903078 1138903 1145717 434598 2503222 1121464 1049225 1527742 580768 588010 12398687 8596207

1238510 918823 2469510 2439350 609395 2576705 1648561 1045962 556737 1054292 1332657 1304789 536959 3059906 1236598 1229622 1849140 697851 637725 26443092 9721896

113255 63498 207780 244946 41836 189135 86550 85884 30370 81051 119793 77956 29054 259952 75862 64390 135545 49252 63643 2019752 879400

134222 76397 187693 296370 37497 203938 100029 96648 32932 119236 113766 128682 36876 342092 106038 69345 158439 55349 54967 2350516 915486

163147 114599 273993 289552 52464 208111 133898 120913 61216 157761 178809 174227 48732 462220 170183 178842 222304 98302 52286 3161559 1707105

76860 65305 222720 300735 37517 207242 57124 89277 42266 124532 132579 89042 43118 309088 91282 55772 172655 18471 26248 2161833 912123

120633 104585 305833 174107 43958 302143 105823 117025 51125 155499 70696 113468 50880 390536 81332 101219 207492 32236 50730 2579320 916605

142311 126707 424168 248871 33039 402589 125241 141327 61163 171407 107254 150287 52617 443350 104795 90654 208195 52397 52382 3138754 826452

4387.33 6478.82 3727.64 6435.69 4696.25 25725.7 102205 299469

4559.9 7175.45 3984.64 6649.71 4906.08 27275.78 8623483 21022170

5436.18 8835.04 4534.25 7233.65 5810.01 31849.13 9753745 36196837

489.38 687.16 316.61 433.91 448.44 2375.5 881776 2901528

448.57 898.08 491.63 756.82 288 2883.1 918369 3268885

589.37 1153.23 673.12 1106.29 448.24 3970.25 1711075 4872634

403.45 615.81 336.91 531.54 607.84 2495.55 914618.6 3076452

455.16 822.71 445.77 550.89 684.27 2958.8 919564 3498884

550.88 1166.24 500.62 652.96 727.73 3598.43 830050 3968804

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PROFIT
The total gross profit of the Public Sector Banks stood at Rs.3,61,968.37 crore during 2010-11 as compared to Rs. 2,10,221.7 crore 2009-10. The net profit of the banks also went up from Rs.39,688.04 crore in 2010-11 to Rs 34,988.84 crore during 2009-10. highest net profit was recorded by the State Bank of India (8264.52 crore )followed by the Punjab National Bank (4433.5 crore) apart from these two banks, other banks which have recorded remarkable growth in net profit in year 2010-11.

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SECTOR WISE CLASSFICATION OF NPA

Appendix Table IV.2(A): Non-Performing Assets of Public Sector Banks - Sector-wise (As at end-March 2010) (Amount in ` crore) Sr. No. Name of the Bank Priority Sector NPAs Amount Per cent to total Public Sector NPAs Amount Per cent to total Non-Priority Sector NPAs Amount Per cent to total Total NPAs

Amount

Public Sector Banks Nationalised Banks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank IDBI Bank Ltd. State Bank Group State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of India State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Travancore

30,848 19,908 713 218 1,444 2,147 795 1,423 1,658 398 379 249 1,192 911 138 2,471 1,091 976 1,632 894 394 785 10,940 269 290 9,073 210 291 543 264

53.8 56.1 58.4 44.7 65.8 47.9 65.7 56.8 67.5 61.1 59.0 54.2 34.6 62.0 67.1 76.9 54.4 58.6 61.3 65.1 39.6 36.9 50.1 43.9 44.9 50.9 42.6 49.0 54.0 41.1

524 280 119 85 18 8 2 4 12 15 17 244 235 3 6

0.9 0.8 9.8 3.9 0.4 0.3 0.1 0.6 0.9 1.7 1.1 1.3 0.5 1.0

25,929 15,283 389 270 667 2,317 415 1,081 792 253 263 210 2,248 558 68 739 902 674 1,032 478 583 1,344 10,646 343 356 8,529 283 301 463 372

45.3 43.1 31.9 55.3 30.4 51.7 34.3 43.2 32.2 38.9 41.0 45.8 65.3 38.0 32.9 23.0 45.0 40.5 38.7 34.9 58.7 63.1 48.8 56.1 55.1 47.8 57.4 50.5 46.0 57.9

57,301 35,470 1,221 488 2,196 4,481 1,210 2,505 2,458 651 642 459 3,442 1,469 206 3,214 2,005 1,665 2,664 1,372 994 2,129 21,831 612 646 17,836 493 595 1,007 642

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sector wise classification of NPA

Priority Sector NPAs

45.3 53.8

Non-Priority Sector NPAs

0.9

The above chart represent the NPA position in different types of sectors like priority, Non priority and public sector. The highest % of NPAs are in the priority sector. The NPA % of Non-priority sector is with 45% whereas 54% NPAs in priority sector which included agriculture, smallscale industry, small business etc.

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IMPACT OF NPA ON PUBLIC SECTOR BANKS

Profitability:NPA means booking of money in terms of bad asset, which occurred due to wrong choice of client. Because of the money getting blocked the prodigality of bank decreases not only by the amount of NPA but NPA lead to opportunity cost also as that much of profit invested in some return earning project/asset. So NPA doesnt affect current profit but also future stream of profit, which may lead to loss of some long-term beneficial opportunity. Another impact of reduction in profitability is low ROI (return on investment), which adversely affect current earning of bank.

Liquidity:Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to borrowing money for shot\rtes period of time which lead to additional cost to the company. Difficulty in operating the functions of bank is another cause of NPA due to lack of money. Routine payments and dues. Involvement of management:Time and efforts of management is another indirect cost which bank has to bear due to NPA. Time and efforts of management in handling and managing NPA would have diverted to some fruitful activities, which would have given good returns. Now days banks have special employees to deal and handle NPAs, which is additional cost to the bank. Credit loss:Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit. It will lose its goodwill and brand image and credit which have negative impact to the people who are putting their money in the banks. Early symptoms by which one can recognize a performing asset turning in to Non-performing asset:Four categories of early symptoms:--------------------------------------------------(1) Financial: Non-payment of the very first instalment in case of term loan. Bouncing of cheque due to insufficient balance in the accounts. Irregularity in instalment. Irregularity of operations in the accounts. Unpaid overdue bills. Declining Current Ratio. Payment which does not cover the interest and principal amount of that instalment.
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 While monitoring the accounts it is found that partial amount is diverted to sister concern or parent company. (2) Operational and Physical: If information is received that the borrower has either initiated the process of winding up or are not doing the business. Overdue receivables. Stock statement not submitted on time. External non-controllable factor like natural calamities in the city where borrower conduct his business. Frequent changes in plan. Non-payment of wages. (3) Attitudinal Changes: Avoidance of contact with bank. Problem between partners. (4) Others: Changes in Government policies. Death of borrower. Competition in the market. Preventative Measurement for NPA Early Recognition of the Problem Identifying Borrowers with Genuine Intent

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RATIO ANALYSIS

The relationship between two related items of financial statements is known as ratio. A ratio is just one number expressed in terms of another. The Ratio is customarily expressed in three different ways. It may be expressed as a proportion between the two figures. Second it may be expressed in terms of percentage. Third, it may be expressed in terms of rates. The use of ratio has become increasingly popular during the last few years only. Originally, the bankers used the current ratio to judge the capacity of the borrowing business enterprises to repay the loan and make regular interest payments. Today it has assumed to be important tool that anybody connected with the business turns to ratio for measuring the financial strength and the earning capacity of the business.

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1. GROSS NPA RATIO:

Gross NPA Ratio is the ratio of gross NPA to gross advances of the Bank. Gross NPA is the sum of all loan assets that are classified as NPA as per the RBI guidelines. The ratio is to be counted in terms of percentage and the formula for GNPA is as follows:

Gross NPA ratio = Gross NPA *100 Gross advances

S no .

Name of Bank

Gross NPA

Gross Advances

Gross NPA

Gross Advances

Gross NPA

Gross Advances

Gross

NPA

to

Gross

Advances

2009 Nationalised Banks 1 2 3 4 5 6 7 8 9 10 11 12 Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of 1078.25 368.14 1842.93 2470.88 798.41 2167.97 2316.55 559.22 620.77 459.18 1923.41 1058.12 2009 59443.4 44427.6 144844.87 144731.56 34817.28 139036.91 86740.27 48927.12 29185.36 51830.64 75809.54 69064.72 2010 1220.85 487.87 2196.06 4481.21 1209.79 2504.53 2457.89 650.94 641.99 458.59 3441.66 1468.75 71509.92 56505.37 133588.79 135193.96 40926.15 163290.97 106102.69 63629.05 35721.41 59963.3 73025.81 84183.94 2011 1646.98 995.64 2786.23 4356.6 1173.7 2981.78 2394.53 790.23 842.24 720.02 2793.42 1920.54 91585.45 72154.45 171801.48 165147.16 47487.42 202724.02 131390.02 87213.45 45163.37 72587.33 103087.47 96838.91 1.81 0.83 1.27 1.71 2.29 1.56 2.67 1.14 2.13 0.89 2.54 1.53

2010

2011

1.71 0.86 1.64 3.31 2.96 1.53 2.32 1.02 1.8 0.76 4.71 1.74

1.8 1.38 1.62 2.64 2.47 1.47 1.82 0.91 1.86 0.99 2.71 1.98

Commerece 13 14 15 16 17 18 19 20 Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of india Vijaya Bank IDBI Bank Total of 161.04 2767.46 1594.54 1539.51 1923.35 1019.56 698.82 1435.69 26803.8 24698.1 156098.45 82495.04 69669.05 98264.85 35727.45 35874.63 103915.07 1535601.9 206.15 3214.41 2004.59 1665.02 2663.87 1372.3 994.45 2129.39 35470.31 32738.67 188306.11 82599.13 77568.26 118272.7 42755.9 41934.53 138583.59 1746400.25 424.28 4379.39 2589.12 3090.17 3622.82 1355.78 1259.19 2784.73 42907.39 42832.62 243998.78 97534.61 93246.24 153022.46 53933.73 49222.24 155995.5 2176966.7 0.65 1.77 1.93 2.21 1.96 2.85 1.95 1.38 1.75 0.63 1.71 2.43 2.15 2.25 3.21 2.37 1.54 2.03 0.99 1.79 2.65 3.31 2.37 2.51 2.56 1.79 1.97

Nationalized Banks 1 State Bank Of India Associates Of SBI 2 State Bank of Bikaner and Jaipur 3 State Bank of 486.04 43937.72 645.67 53296.94 1150.45 65422.67 1.11 1.21 1.76 490.34 30088.1 611.85 35563.15 835.4 41743.91 1.63 1.72 2 16345.64 549296.81 17836.3 544408.53 23073.52 662444.06 2.98 3.28 3.48

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Hyderabad 4 5 6 State Bank of Mysore State Bank of Patiala State Bank of 367.61 573.9 549.02 25869.88 43960.81 32971.58 595.26 1006.61 641.98 29858.89 47051.3 38802.37 863.74 1381.68 835.23 34425.69 52330.61 46470.55 1.42 1.31 1.67 1.99 2.14 1.65 2.51 2.64 1.8

Travancore Total of 5 Associates of SBI Total of State Bank Group Total Of Public 45616.35 2261726.8 56807.98 2495381.43 71047.41 3079804.2 2.02 2.28 2.31 18812.55 726124.9 21337.67 748981.18 28140.02 902837.49 2.59 2.85 3.12

Sector Banks

GROSS NPA 2009

The table above indicates the quality of credit portfolio of the banks. High gross NPA ratio indicates the low credit portfolio of bank and vice-a-versa. We can see from the above table that the State bank of india has the higher gross NPA ratio of 2.98 % followed by the united bank of india with 2.85 %. Central bank of india, Indian overseas bank, bank of Maharashtra also have higher gross NPA ratio with 2.67 %, 2.54% and 2.29%. Whereas the Punjab & Sind bank ,Andhra Bank, Indian bank showed lower ratio with 0.65 %, 0.83 % and 0.89 % in the year 2009

GROSS NPA 2010

The table above indicates the quality of credit portfolio of the banks. High gross NPA ratio indicates the low credit portfolio of bank and vice-a-versa. We can see from the above table that the Bank of india has the higher gross NPA ratio of 3.31 % followed by the State bank of india with 3.28 %. United Bank of India, bank of Maharashtra also have higher gross NPA ratio with 3.21 % & 2.96%. Whereas the Punjab & Sind bank, Indian Bank, Andhra Bank showed lower ratio with 0.63 %, 0.76 % and 0.86 % in the year 2010

GROSS NPA 2011

The table above indicates the quality of credit portfolio of the banks. High gross NPA ratio indicates the low credit portfolio of bank and vice-a-versa. We can see from the above table that the State Bank of india has the higher gross NPA ratio of 3.48 % followed by the UCO Bank with 3.31 %. Indian Overseas Bank , Syndicate Bank also have higher gross NPA ratio with 2.71 % & 2.65%. Whereas the Corporation Bank , Indian Bank, Punjab & Sind bank showed lower ratio with 0.91 %, 0.99 % and 0.99 % in the year 2011

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2. NET NPA RATIO

The net NPA percentage is the ratio of net NPA to net advances, in which the provision is to be deducted from the gross advance. The provision is to be made for NPA account. The formula for that is: Net NPA Ratio = Gross NPA-Provision * 100 Gross advances-Provision

S no.

Name of Bank

Gross Gross Gross Gross NPA Provision Advances Gross NPA Provision Advances Gross NPA Provision Advances

Net NPA to Net Advances 2009 2010 1.37 0.55 0.61 0.33 0.97 0.98 1.23 2.04 2.05 2.36 0.94 0.67 2.35 2.05 0.89 0.48 1.23 1.53 0.21 0.11 2.38 3.5 1.8 1.12 0.39 0.35 1.54 1.19 1.52 1.8 1.69 1.7 1.37 1.67 2.18 2.59 1.67 1.25 1.25 1.37 1.38 1.67 2.62 2.83 1.56 0.93 1.02 1.31 1.67 1.52 0.96 1.82 1.99 1.51 2011 0.9 0.96 1.1 1.59 1.95 0.77 1.61 0.51 1.65 0.45 1.83 1.44 0.78 1.39 2.12 2.95 1.92 2.02 1.61 1.64 1.44 2.8 1.67 1.55 2.26 2.23 1.63

Nationalised Banks 1 Allahabad Bank 2 Andhra Bank 3 Bank of Baroda 4 Bank of India 5 Bank of Maharashtra 6 Canara Bank 7 Central Bank of India 8 Corporation Bank 9 Dena Bank 10 Indian Bank 11 Indian Overseas Bank 12 Oriental Bank of Commerece 13 Punjab and Sind Bank 14 Punjab National Bank 15 Syndicate Bank 16 UCO Bank 17 Union Bank of India 18 United Bank of india 19 Vijaya Bank 20 IDBI Bank Total of Nationalized Banks 1 State Bank Of India Associates Of SBI 2 State Bank of Bikaner and Jaipur 3 State Bank of Hyderabad 4 State Bank of Mysore 5 State Bank of Patiala 6 State Bank of Travancore Total of 5 Associates of SBI Total of State Bank Group Total Of Public Sector Banks

2008-2009
1078.25 368.14 1842.93 2470.88 798.41 2167.97 2316.55 559.22 620.77 459.18 1923.41 1058.12 161.04 2767.46 1594.54 1539.51 1923.35 1019.56 698.82 1435.69 26803.8 16345.64 490.34 486.04 367.61 573.9 549.02 18812.55 45616.35 268.55 98.66 435.98 697.25 86.31 875 289.06 123 264 349.58 125.44 -189.5 65.49 377.09 345.41 370.07 585.22 244.99 100.56 133.58 5645.74 2000.94 75.91 -3050 21.51 76.79 105.28 59443.4 44427.6 144844.87 144731.56 34817.28 139036.91 86740.27 48927.12 29185.36 51830.64 75809.54 69064.72 24698.1 156098.45 82495.04 69669.05 98264.85 35727.45 35874.63 103915.07 1535601.9 549296.81 30088.1 43937.72 25869.88 43960.81 32971.58 1220.85 487.87 2196.06 4481.21 1209.79 2504.53 2457.89 650.94 641.99 458.59 3441.66 1468.75 206.15 3214.41 2004.59 1665.02 2663.87 1372.3 994.45 2129.39 35470.31 17836.3 611.85 645.67 595.26 1006.61 641.98

2009-2010
313 170 269 623 187 900 322 170 199 14 366 171 63 821 447 268 546 199 134 144 6326 2475 73 135 54 73 59 71509.92 56505.37 133588.8 135194 40926.15 163291 106102.7 63629.05 35721.41 59963.3 73025.81 84183.94 32738.67 188306.1 82599.13 77568.26 118272.7 42755.9 41934.53 138583.6 1746400 544408.5 1646.98 995.64 2786.23 4356.6 1173.7 2981.78 2394.53 790.23 842.24 720.02 2793.42 1920.54 424.28 4379.39 2589.12 3090.17 3622.82 1355.78 1259.19 2784.73 42907.39 23073.52

2010-2011
830 305 901 1754 251 1426 288 345 97 392 919 532 92 994 531 354 699 273 474 236 11694 4622 142 138 86 219 81 91585.45 72154.45 171801.5 165147.2 47487.42 202724 131390 87213.45 45163.37 72587.33 103087.5 96838.91 42832.62 243998.8 97534.61 93246.24 153022.5 53933.73 49222.24 155995.5 2176967 662444.1 41743.91 65422.67 34425.69 52330.61 46470.55

35563.15 835.4 53296.94 1150.45 29858.89 863.74 47051.3 1381.68 38802.37 835.23

-769.57 726124.9 21337.67 2870 748981.2 28140.02 5287.94 902837.5 4876.17 2261726.8 56807.98 9195.52 2495381 71047.41 16981.44 3079804

2.69 2.48 2.55 1.81 1.92 1.77

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NET NPA 2008-09

This ratio indicates the degree of risk in the portfolio of the banks. High NPA ratio indicates the high quantity of risky assets in the Banks for which no provision are made. State Bank of India has the highest NPA ratio of 2.85 % followed by the Indian overseas Bank with 2.38 %.Indian Bank has showed the lowest NPA ratio 0 .21% and Punjab & sind Bank have also showed lower NPA ratio 0.39% in 2008-09

NET NPA 2009-10

This ratio indicates the degree of risk in the portfolio of the banks. High NPA ratio indicates the high quantity of risky assets in the Banks for which no provision are made. From the table it becomes clear that the NPA ratio of some banks have been improved quite well as compared to the previous year and some banksneeds to be improve . Indian Overseas bank has the highest NPA ratio of 3.5 % followed by the State Bank of India with 2.83 %.Indian Bank has showed the lowest NPA ratio 0 .11% and Andhra Bank have also showed lower NPA ratio 0.33% in 2009-10

NET NPA 2010-11

This ratio indicates the degree of risk in the portfolio of the banks. High NPA ratio indicates the high quantity of risky assets in the Banks for which no provision are made. From the table it becomes clear that the NPA ratio of most of the banks ration has been increased from previous years that means banks are performing well . Indian UCO bank has the highest NPA ratio of 2.95 % followed by the State Bank of India with 2.8 %.Indian Bank has showed the lowest NPA ratio 0 .45% and Corporation bank have also showed lower NPA ratio 0.51% in 2010-11

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3. PROVISION RATIO
Provisions are to be made for to keep safety against the NPA, & it directly affect on the gross profit of the Banks. The provision Ratio is nothing but total provision held for NPA to gross NPA of the Banks. The formula for that is,

Provision Ratio=

Total Provision *100 Gross NPAs

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S no.

Name of Bank

Gross NPA Provision Gross NPA Provision Gross NPA Provision

Provision Ratio 2009 24.91 26.8 23.66 28.22 10.81 40.36 12.48 21.99 42.53 76.13 6.522 -17.9 40.67 13.63 21.66 24.04 30.43 24.03 14.39 9.304 21.06 12.24 15.48 -62.8 5.851 13.38 19.18 2010 25.66 34.87 12.23 13.9 15.47 35.93 13.11 26.12 31.07 29.87 10.62 11.61 30.48 25.55 22.3 16.12 20.51 14.49 13.5 6.751 18.18 13.88 12 20.87 9.099 7.301 9.151 2011 50.41 30.65 32.33 40.27 21.35 47.83 12.04 43.69 11.48 54.46 32.92 27.68 21.66 22.7 20.49 11.45 19.29 20.11 37.67 8.487 27.25 20.03 16.99 11.95 9.986 15.88 9.642

2008-2009 Nationalised Banks 1 Allahabad Bank 1078.25 268.55 2 Andhra Bank 368.14 98.66 3 Bank of Baroda 1842.93 435.98 4 Bank of India 2470.88 697.25 5 Bank of Maharashtra 798.41 86.31 6 Canara Bank 2167.97 875 7 Central Bank of India 2316.55 289.06 8 Corporation Bank 559.22 123 9 Dena Bank 620.77 264 10 Indian Bank 459.18 349.58 11 Indian Overseas Bank 1923.41 125.44 12 Oriental Bank of Commerece 1058.12 -189.5 13 Punjab and Sind Bank 161.04 65.49 14 Punjab National Bank 2767.46 377.09 15 Syndicate Bank 1594.54 345.41 16 UCO Bank 1539.51 370.07 17 Union Bank of India 1923.35 585.22 18 United Bank of india 1019.56 244.99 19 Vijaya Bank 698.82 100.56 20 IDBI Bank 1435.69 133.58 Total of Nationalized Banks 26803.8 5645.74 1 State Bank Of India 16345.64 2000.94 Associates Of SBI 2 State Bank of Bikaner and Jaipur 490.34 75.91 3 State Bank of Hyderabad 486.04 -305 4 State Bank of Mysore 367.61 21.51 5 State Bank of Patiala 573.9 76.79 6 State Bank of Travancore 549.02 105.28 Total of 5 Associates of SBI Total of State Bank Group 18812.55 1975.43 Total Of Public Sector Banks 45616.35 7621.17

2009-2010
1220.85 487.87 2196.06 4481.21 1209.79 2504.53 2457.89 650.94 641.99 458.59 3441.66 1468.75 206.15 3214.41 2004.59 1665.02 2663.87 1372.3 994.45 2129.39 35470.31 17836.3 611.85 645.67 595.26 1006.61 641.98 313 170 269 623 187 900 322 170 199 137 366 171 63 821 447 268 546 199 134 144 6449 2475 73 135 54 73 59

2010-2011
1646.98 830 995.64 305 2786.23 901 4356.6 1754 1173.7 251 2981.78 1426 2394.53 288 790.23 345 842.24 97 720.02 392 2793.42 919 1920.54 532 424.28 92 4379.39 994 2589.12 531 3090.17 354 3622.82 699 1355.78 273 1259.19 474 2784.73 236 42907.39 11694 23073.52 4622 835.4 1150.45 863.74 1381.68 835.23 142 138 86 219 81

21337.67 2870 28140.02 5287.94 56807.98 9318.86 71047.41 16981.44

10.5 13.45 18.79 16.71 16.4 23.9

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PROVISION RATIO 2008-09

This Ratio indicates the degree of safety measures adopted by the Banks. It has direct bearing on the profitability, Dividend and safety of shareholders fund. If the provision ratio is less, it indicates that the Banks has made under provision. The highest provision ratio is showed by Indian Bank with 76.13 % followed by Dena Bank with 42.53 %. The lowest provision ratio is showed by oriental bank of commerce with -17.9 % and in the year 2008-09.

PROVISION RATIO 2009-10

This Ratio indicates the degree of safety measures adopted by the Banks. It has direct bearing on the profitability, Dividend and safety of shareholders fund. If the provision ratio is less, it indicates that the Banks has made under provision. The highest provision ratio is showed by Canara bank with 35.93 % followed by Andhra Bank with 34.87 %. The lowest provision ratio is showed by IDBI bank 6.75 % and in the year 2009-10

PROVISION RATIO 2010-11

This Ratio indicates the degree of safety measures adopted by the Banks. It has direct bearing on the profitability, Dividend and safety of shareholders fund. If the provision ratio is less, it indicates that the Banks has made under provision. The highest provision ratio is showed by Indian bank with 54.46 % followed by Allahabad Bank with 50.41 %. The lowest provision ratio is showed by state bank of Travancore 9.642 % and in the year 2010-11

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4. PROBLEM ASSET RATIO

It is the ratio of gross NPA to total asset of the bank. The formula for that is: Problem Asset Ratio = Total Assets * 100

Gross NPA

S no.

Name of Bank

Total assets

Gross NPA

Total assets

Gross NPA

Total assets

Gross NPA

problem asset ratio 201011 1.08865 0.91426 0.77741 1.24059 1.53541 0.88723 1.14157 0.55065 1.18896 0.59155 1.56245 1.19034 0.61893 1.15757 1.65398 1.89119 1.53519 1.50574 1.54141 1.09905 1.16087 1.8855

Nationalised Banks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerece Punjab and Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of india Vijaya Bank IDBI Bank Total of Nationalized Banks State Bank Of India Associates Of SBI 2 3 4 5 6 State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore Total of 5 Associates of SBI Total of State Bank Group Total Of Public Sector Banks

2008-2009 97,648.00 68,469.21 2,27,406.73 2,25,501.75 59,030.36 2,19,645.80 1,47,655.24 86,905.80 48,460.52 84,121.74 1,21,073.40 1,12,582.58 40,778.58 2,46,918.62 1,30,255.67 1,11,664.16 1,60,975.51 62,040.72 62,382.61 1,72,402.33 24,85,919.33 9,64,432.08 1078.25 368.14 1842.93 2470.88 798.41 2167.97 2316.55 559.22 620.77 459.18 1923.41 1058.12 161.04 2767.46 1594.54 1539.51 1923.35 1019.56 698.82 1435.69 26803.8 16345.64

2009-2010 1,21,699.21 90,342.42 2,78,316.71 2,74,966.46 71,055.79 2,64,741.09 1,82,671.64 1,11,667.30 57,586.58 1,01,389.32 1,31,096.40 1,37,431.00 56,664.88 2,96,632.79 1,39,050.94 1,37,319.47 1,95,161.85 77,011.22 70,222.09 2,33,572.01 30,28,599.17 10,53,413.74 1220.85 487.87 2196.06 4481.21 1209.79 2504.53 2457.89 650.94 641.99 458.59 3441.66 1468.75 206.15 3214.41 2004.59 1665.02 2663.87 1372.3 994.45 2129.39 35470.31 17836.3

2009-2010 1,51,286.36 1,08,900.73 3,58,397.18 3,51,172.55 76,442.21 3,36,078.76 2,09,757.32 1,43,508.59 70,838.43 1,21,718.31 1,78,784.27 1,61,343.38 68,550.14 3,78,325.25 1,56,538.79 1,63,398.45 2,35,984.44 90,040.53 81,690.63 2,53,376.80 36,96,133.12 12,23,736.20 1646.98 995.64 2786.23 4356.6 1173.7 2981.78 2394.53 790.23 842.24 720.02 2793.42 1920.54 424.28 4379.39 2589.12 3090.17 3622.82 1355.78 1259.19 2784.73 42907.4 23073.5

2008-09 1.10422 0.53767 0.81041 1.09573 1.35254 0.98703 1.56889 0.64348 1.28098 0.54585 1.58863 0.93986 0.39491 1.1208 1.22416 1.3787 1.19481 1.64337 1.12022 0.83276 1.07822 1.69485

2009-10 1.00317 0.54002 0.78905 1.62973 1.70259 0.94603 1.34552 0.58293 1.11483 0.45231 2.62529 1.06872 0.36381 1.08363 1.44162 1.21252 1.36495 1.78195 1.41615 0.91166 1.17118 1.69319

46,370.21 76,722.00 40485.79 69618.53 49460.52 2,82,657.05 12,47,089.13 37,33,008.46

490.34 486.04 367.61 573.9 549.02 2,466.91 18,812.55 45,616.35

54,189.68 88,386.02 45408.93 76,076.97 59454.7 3,23,516.30 13,76,930.04 44,05,529.21

611.85 645.67 595.26 1006.61 641.98 3,501.37 21,337.67 56,807.98

62,954.50 10669.8 52032.46 81286.25 70976.75 2,77,919.76 15,01,655.96 51,97,789.08

835.4 115.045 863.74 1381.68 835.23 4,031.10 27104.6 70012

1.05745 0.63351 0.908 0.82435 1.11002 0.87276 1.50852 1.22197

1.12909 0.73051 1.31089 1.32315 1.07978 1.08229 1.54966 1.28947

1.32699 1.07823 1.66 1.69977 1.17677 1.45045 1.80498 1.34696

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PROBLEM ASSET RATIO 2008-09

It has been direct bearing on return on assets as well as liquidity risk management of the bank. High problem asset ratio, which means high liquid. from the above table it becomes clear that State bank of India and United Bank of india have the high ratio of 1.69% and 1.69%.thts ratio implies that the both above banks have the liquid assets through which they will be able to repay their liabilities of deposits quickly as compared to other banks in year 2008-09

PROBLEM ASSET RATIO 2009-10

It has been direct bearing on return on assets as well as liquidity risk management of the bank. High problem asset ratio, which means high liquid. from the above table it becomes clear that Indian overseas bank and United Bank of india have the high ratio of 2.62% and 1.78%.thts ratio implies that the both above banks have the liquid assets through which they will be able to repay their liabilities of deposits quickly as compared to other banks in year 2009-10

PROBLEM ASSET RATIO 2010-11

It has been direct bearing on return on assets as well as liquidity risk management of the bank. High problem asset ratio, which means high liquid. from the above table it becomes clear that UCO Bank and Syndicate Bank have the high ratio of 1.89% and 1.92%.thts ratio implies that the both above banks have the liquid assets through which they will be able to repay their liabilities of deposits quickly as compared to other banks in year 2010-11

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5. CAPITAL ADEQUACY RATIO

Capital Adequacy Ratio can be defined as ratio of the capital of the Bank, to its assets, which are weighted/adjusted according to risk attached to them i.e. Capital Adequacy Ratio = Capital * 100 Risk Weighted Assets

S no.

Name of Bank

capital adequacy ratio 2008-09 2009-10 13.11 11.99 13.22 NA 14.05 12.94 13.01 12.04 12.05 NA 14.10 13.25 13.12 9.39 13.61 NA 12.07 NA 13.98 NA 13.2 NA 12.98 NA NA 13.46 11.82 NA 11.24 11.02 NA NA NA 12.51 11.97 11.73 13.56 14.35 14.03 12.68 13.27 13.28 11.93 13.15 11.57 14.25 14.52 11.53 12.99 12.60 2010-11 13.62 13.93 14.36 12.94 12.78 13.43 12.23 15.37 12.77 12.71 14.78 12.54 13.10 14.16 12.70 12.51 12.80 13.21 12.50 11.31 13.39 13.30 14.90 12.42 13.26 39 | P a g e

Nationalised Banks 1 Allahabad Bank 2 Andhra Bank 3 Bank of Baroda 4 Bank of India 5 Bank of Maharashtra 6 Canara Bank 7 Central Bank of India 8 Corporation Bank 9 Dena Bank 10 Indian Bank 11 Indian Overseas Bank Oriental Bank of 12 Commerece 13 Punjab and Sind Bank 14 Punjab National Bank 15 Syndicate Bank 16 UCO Bank 17 Union Bank of India 18 United Bank of india 19 Vijaya Bank 20 IDBI Bank 1 State Bank Of India Associates Of SBI 2 3 4 5 State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala

6 State Bank of Travancore

13.53

14.03

13.74

The capital adequacy ratio is important for the to maintain as per the banking regulations. As far as this ratio is concerned the Corporation Bank has shown much appreciated result by acquiring the ratio of 15.37% followed by the State Bank of Hyderabad and Indian Overseas Bank having ratios of 14.90%and 14.70% in 2011 Tire-I: Paid up capital, Statutory Reserve, Revenue capital reserves (excluding revolution reserve) and other undisclosed reserves LESS accumulated losses till the current year, investment in subsidiaries, other intangible assets. Tire-II: Property Revaluation discounted ,Subordinate Assets, Privately placed Bonds, Hybrid capital, Investment Fluctuation Reserve, provisions on standard assets. & Capital should not exceed Tire-I

6.SUB-STANDARD ASSETS RATIO

It is the ratio of Total Substandard Assets to Gross NPA of the bank. Substandard Assets Ratio= total substandard assets *100 Gross NPAs The ratios calculated below are for the entire public sector banks:
Rs in crore 2010 27688 71047

year Substandard Assets Gross NPA Calculation of Ratio

2008
16870

2009 19521 56808

45616

36.98 34.363

38.97

It indicates scope of up gradation/improvement in NPA. Higher substandard asset ratio means that in whole NPA the sub standard ratio has major proportion, which indicates that there is a high scope for advance up gradation or improvement because it will be very easy to recover the loan as minimum duration of default. In 2008 this ratio of Public Sector bank was 36.98% but dropped in 2009 & than again it increased in 2010, which means there is a need of advance up gradation.
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REFERENCES

Prshant k reddy (2002), A comparative study of non performing assets in india in global contexthttp://www.crisil.com/youngthoughtleader/winners/topic3-Prashanth-Reddy-IIM-AHM.PDF Desai(2002) Distressed Asset Management: A Reality Checkhttp://www.nishithdesai.com/Research-Papers/IVCJDistressed%20Asset%20Mgmt-A%20Reality%20Check.pdf

R. Ranjan and S.C. Dhal, 2003, Non-Performing Loans and Terms of Credit of Public Sector Banks in India: An Empirical Assessment, RBI Occasional Papers, 24(3):81-121.19
Mukherjee, P. (2003) Dealing with NPAs: Lessons from International Experiences.

Misra(2003) Pro-cyclical Management of Banks Non-Performing Loans by the Indian Public Sector Banks http://www.bis.org/repofficepubl/arpresearch201003.08.pdf K. Harpreet and J.S. Parricha, 2004, Management of NPAs of Public Sector Banks, The Indian Journal of Commerce, 57(2):14-21. Khasnobis(2005)NPAEmergingChallenge
http://203.115.117.202/Arcil1/knowledge_centre/publications/papers/NPA_S1_Emerging-Challenges.pdf

B.Satish Kumar(2005)Non Performing Assets in Indian banks Das, S & Bose, S.K (2005): Risk Modelling A Markovian Approach, The Alternative, Vol.IV, No.1, March 2005, pp 22-27.
Chugh (2005), " Indian baking today-Impact of Reforms"

Harpreet (2006) Credit management and problem of NPAs in Public Sector Banks
Kumar (2006) "Banking Sector Efficiency in Globalize Economy," Gourav Vallabh, Anoop Bhatia and Saurabh Mishra(2007) Non-Performing Assets of Indian Public, Private and Foreign Sector Banks: An Empirical Assessment The IUP Journal of Bank Management, 2007, vol. VI, issue 3, pages 7-28 Karunakar, M., Vasuki, K. & Saravanan, S. (2008), Are Non-performing Assets Gloomy or Greedy from Indian Perspective. Research Journal of Social Sciences, 3, pp. 4-12. Mohit Kakkar (2008 -2010) COMPARATIVE ANALYSIS ON NON PERFORMING ASSETS OF CANARA BANK AND PUBLIC SECTOR BANKS

Goyal kanika(2010)Empirical study of non performing assets management of Indian public sector banks
Asia Pacific Journal of Research in Business Management Year : 2010, Volume : 1

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BIBLOGRAPHY

www. rbidocs.rbi.org.in www.moneycontrol.com www.ijrcm.org.in

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