SKN School of Business Management

Summer Project for 2011-2012

COMPARATIVE ANALYSIS ON NON PERFORMING ASSETS OF PRIVATE AND PUBLIC SECTOR BANKS By Shweta Roy

I. OBJECTIVES OF STUDY
1) To compare the performance of public and private banks of India. 2) To study the Reasons for & Impact of NPAs 3) To check the proportion of NPA of different types of banks in different categories. 4) To evaluate the efficiency in managing Non Performing Asset of different types of banks (Public and Private) using NPA ratios. 5) To suggest various measures for NPA management

II. RESEARCH METHODOLOGY

In this project Descriptive research methodologies

were use. At the first stage theoretical study is attempted. At the second stage Historical study is attempted. At the Third stage Comparative study of NPA is undertaken.

III. SCOPE OF STUDY

Concept of Non Performing Asset Guidelines Impact of NPAs Reasons for NPAs Preventive Measures Tools to manage NPAs

CHAPTER II - COMPANY PROFILE

"One Family, One Bank, Bank of Maharashtra ".

BRIEF HISTORY OF THE BANK:-

BANK OF MAHARASHTRA was registered on 16th September 1935.

Professor V.G.Kale (economist) was the first chairman of the Bank.

On February 8th 1936 Commencement of Business took place. The Bank

was Nationalized on 19th July 1969 like other 13 Public sector Banks.

The new Head Office building at LOKMANGAL Pune was inaugurated by

honorable Prime Minister Shri. Morarji Desai on 21st September 1978. branches all over India.

After nationalization in 1969, the bank expanded rapidly. It now has 1421

The Bank has the largest network of branches by any Public sector bank in

the state of Maharashtra. The Bank strives to become a Customer Centric, Innovative, Technology Savvy, Modern Bank with strong fundamentals and is aligning itself with global standards of performance.

 The Bank has operationalised ATM Network of 345 ATMs

across the country with Visa debit cards. It has joined other ATM networks like National Financial Switch (NFS) and MITR enabling its customers to have access to more than 33000 ATMs across the country.
Total business of the Bank was to extend of Rs. 87,000

crores as on 31.07.2009. The Bank is fully geared to comply with new capital Adequacy Framework under Basel-II with respect to capital and other regulatory requirement.

MEANING AND NATURE OF

 A Non-Performing Asset (NPA) or account is an

advance where on the balance sheet date in respect of Interest and/or installment of principal remains overdue for a period of more than 180days 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).

Asset Classification

Loss Assets

Standard assets
Doubtful Assets Sub-standard Assets

PROVISIONING NORMS

SUMMARY REPORT ON GROSS ADVANCES & NPAs FOR BOM

Findings
Public Company
5.00% 4.50% 4.00% 3.50% Axis Title 3.00% 2.50% 2.00% 1.50% 1.00% 0.50%

0.00%
Bank of Baroda Net NPAs to Net Advances Gross NPAs to Gross Advances 0.34% 1.36% Bank of India 1.31% 2.85%

Bank of Maharashtra 1.64% 2.96%

Union Bank of India 0.81% 2.20%

IDBI Bank Ltd. 1.02% 1.52%

3.5 3 2.5 Axis Title 2 1.5 1 0.5 0 Axis Bank Gross NPAs to gross advances Net NPAs to net advances 1.25 0.29

Private Bank

HDFC Bank 1.43 0.31

ING Vysya Bank 2.96 1.2

ICICI Bank 1.05 2.12

Kotak Mahindra Bank 3.04 1.48

Findings
Rs. 250,000.00

Rs. 250,000.00
Rs. 200,000.00 Rs. 200,000.00 Rs. 150,000.00

Rs. 150,000.00

Rs. 100,000.00

Deposit
Investment Advances

Rs. 100,000.00

Deposit Investment Advances

Rs. 50,000.00

Rs. 50,000.00

Rs. -

Rs. -

Gross NPA Analysis

Average of these ten banks gross NPAs is 2.06 as

percentage of total assets. So if we compare in private sector banks AXIS, ICICI Bank and HDFC Bank are below average of all banks and in public sector IDBI Bank Ltd. and Bank of Baroda. Average of these five private sector banks gross NPA is 1.95 and average of public sector banks is 2.17. Which is higher in compare of private sector banks.

Net NPA Analysis

Average of these ten banks net NPA is 1.06.

In the public sector banks Bank of Baroda, Union

Bank of India, IDBI Bank Ltd. banks are below this. The difference between private and public banks average is not vast. Private sector banks net NPA average is 1.10 and in public sector banks it is 1.02 as percentage of total assets. As we know that net NPA shows actual burden of banks. ICICI Bank has highest NPA figure and HDFC Bank has lowest in comparison.

Suggestions
1) Effective and regular follow-up of the end use of

the funds sanctioned 2) Combining traditional wisdom with modern statistical tools like Value-at-risk analysis and Markov Chain Analysis 3) A healthy Banker-Borrower relationship should be developed 4)Manage the NPAs by the banks is Compromise Settlement Schemes

Suggestions

5) Commercial Banks should be allowed to come up

with their own measures to address the problem of NPAs. This may include waiving and reducing the principal and interest on such loans, or extending the loans, or settling the loan accounts. They should be fully authorized and they should be able to apply all the preferential policies granted to the asset management companies.