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Presented by Dharmendra Singh Roll no : BM-010261

The core objectives of the study are:

To study the various types of risk available in banks. To study the Techniques used to sort out these various risk. Analysis of Credit Risk Management in brief. Comparison between Non performing assets and Inflation
rate in Public and Private Sectors Banks.

Risks can be classified into Seven broad categories:

Credit Risk Market Risk (Interest Rate Risk, Liquidity Risk) Operational Risk Systematic Risk Liquidity Risk

Counterparty Risk
Legal Risk

Basel II uses a three pillars concept(1) minimum capital requirements, (2) supervisory review and (3) market discipline-to promote greater stability in financial system. the

How Are These Risks Managed :

Standards and reports, Position limits or rules, Investment guidelines or strategies,

Incentive contracts and compensation.


Setting policies and guidelines, Ensuring that market risk management processes satisfy
Banks policy,

Reviewing and approving market risk limits, Appointment of qualified and competent staff.


pricing for additional risk, increased holdings of capital to compensate for the
additional risk,

Fixing exposure limits for borrowers Collateral security Personal Guarantees

Types of Research:
Exploratory Research & Analytical Research

The ratio of non-performing assets (NPA) to total loans (TL) on private and public sector banks

Data Collection:
Secondary Data

Sample size :
A total of 22 Scheduled Commercial Banks that were listed in the Bombay Stock Exchange (BSE) were chosen for this study based on the availability of the data for the entire 3 year period from 2009 to 2011

Tools used for analysis

Regression Model
Dependent variable (y) = Non Performing Asset Independent variable (x)= Inflation

Hypothesis: Ho= There is No significance linear relationship between NPA and Inflation rate. H1= There is significance linear relationship between NPA and Inflation rate.


Comparison between Non-performing asset to net advances and Inflation rate in Private Sector Banks:

Comparison between Non-performing asset to net advances and Inflation rate in Public Sector Banks:



(1) In 2009 and 2010, the percentage of NPA to net advances was
higher in private sector banks , but in 2010, it was higher in public sector banks.

(2) A majority of Indian banks having very low level of competence in

credit, market and operational risk measurement as compare to multinationals bank.

(3) Basel II gives an opportunity and framework for improvement to

Indian Banks.


The report shows that the Risk in banking sector of India is

somehow effected by the inflation rate prevailing in the economy.

Here in we have considered 15 public sector banks and 7

private sectors bank and analysed the relation between Non performing Asset to Net Adavances and Inflation rate prevailing in Economy for the period of three year (2009-11) .

In general we can conclude that there is a low degree of

correlation existing between Non Performing Asset and inflation rate which signifies that there is very less risk involved in banks due to change in inflation rate.


Bank should maintain 0% NPA by lending and investing

or creating quality assets which earn returns .

Bank should adopt the changing norms of BASEL


Indian Banks should strengthen internal banking