Special Issue - 2017 International Journal of Engineering Research & Technology (IJERT)

ISSN: 2278-0181
NCIETM - 2017 Conference Proceedings

Non-Performing Assets: A Comparison of ICICI

Bank and HDFC Bank
Dr. Prerna Dawar*Ms. Pooja Sharma**
*Dean & Professor Geeta Engineering College , Naultha , Panipat
*Assistant Professor, SBD Group of Institutions , Kurukshetra

Abstract - Banking in India originated in the last decade of the II. NON PERFORMING ASSETS (NPAs)
18th century. Private sector banks occupy a major part of NPA refers to loans that are in peril of default. The asset
banking in India. Private sector banks have a very wide has been categorized as non-performing asset when the
network of branches in rural and urban areas. But now a day borrower failed to make principle or interest payment
they have diversified their activities to the emerged fields of
within 90 days. It has always been a challenge for financial
operations like merchant banking, leasing and venture capital
etc. Due to increased level of competition private banks have institutions to manage their Non-performing assets because
been lending aggressively to the customers which in turn of the dependency on interest payment. NPAs of financial
increasing the proportion of Non-Performing Assets institutions increase due to pressure from economy as they
(Henceforth, NPAs). Non-performing Asset has been an have to lent aggressively which in turn, reduces their
important parameter to analyse of financial performance of capacity to capture all the assets completely. NPAs can be
banks as it results in decreasing margin and higher divided into two main categories as follows:
provisioning requirements for doubtful debts. In this research
paper, secondary data has been fetched out from database of
Gross NPAs Net NPAs
Reserve Bank of India regarding Net NPA ratios of ICICI and
HDFC Bank in order to have a clear picture about financial
performance of both the banks. The study revolves around Gross NPAs considered to be the Net NPAs considered
kind of assets for which the being the assets that are
the period of five years from 2009-2014. provisions have been made by still not recovered but the
banks and are irrecoverable in part payment has been
Keywords: Non-Performing Assets, Gross NPA, Net NPA, nature, still held in books of received and kept in
Performance. accounts of banks suspense accounts. Net
NPAs has been obtained
by deducting interest due
I. INTRODUCTION from Gross NPAs.
A strong banking sector has been backbone of economy.
Banking in India originated in the last decade of the 18 th
century. Private sector banks occupy a major part of Classification of NPAs as per time horizon
banking in India. Private sector banks have a very wide On the basis of time period and payment of dues, NPAs
network of branches in rural and urban areas. But now a can be classified as under:
day they have diversified their activities to the emerged Sub Standard Assets Doubtful Assets Loss Assets
fields of operations like merchant banking, leasing and
venture capital etc. Due to increased level of competition
For which banks have The assets that have The asset considered
private banks have been lending aggressively to the to make 15 percent been NPAs for more to be loss asset if
customers which in turn increasing the proportion of Non- reserves and the time than one year time auditors have
Performing Assets. Non-performing Asset has been an period does not period. classified it so but the
important parameter to analyse of financial performance of exceed one year amount has not been
completely written-
banks as it results in decreasing margin and higher off.
provisioning requirements for doubtful debts. The
underlying objective has been to make the system more
competitive, efficient and profitable. Banking sector has III. REVIEW OF LITERATURE
always been vital for flourishing economy. The failure of Goyal Kanika (2010) studied the increment in gross and net
the banking sector may have an adverse impact on other NPAs. The study has been performed on public sector
sectors too. Non-performing asset (NPA) has been one of banks and agriculture sector. The study focussed on
the major concerns for banks in India. Performance of secondary data base and the data has been taken from the
banks has been reflected through the NPAs. website of Reserve Bank of India. Various statistical tool
like regression and ANOVA has been applied. The results
depicted that public sector banks have been able to manage
their assets properly but NPAs have been a matter of
concern for agriculture sector.

Volume 5, Issue 11 Published by, www.ijert.org 1

Special Issue - 2017 International Journal of Engineering Research & Technology (IJERT)
ISSN: 2278-0181
NCIETM - 2017 Conference Proceedings

Kamalpreet Kaur and Balraj Singh (2011) studied the

NPAs of Indian banking industry. The research focussed on
various aspects such as magnitude of NPAs, reasons of
Net NPAs Ratio of
NPAs and impact on Indian economy. The results depicted
that out of whole Indian banking industry, public sector
ICICI Bank and HDFC
banks have been lagging behind in managing their NPAs Bank
and authors suggested that Government should take strict
actions for the same. 2.5

Ramesh.K.V, Sudhakar.A., (2012) case studied the NPA 2

management in public sector banks by taking Canara and
SBI bank. Secondary Data fetched for time horizon of ten
years from 2000-2010. It has been concluded that NPAs 1.5
has not been properly managed in banks under study and
adversely affected the performance.
1
IV. OBJECTIVES OF THE STUDY
 To find the difference in NPAs of ICICI Bank and 0.5
HDFC Bank.
 To study the NPAs ratios of ICICI Bank and HDFC 0
Bank.
2009 2010 2011 2012 2013 2014
Hypothesis of the study ICICI Bank HDFC Bank
H0: There is no significant difference in NPAs of ICICI
Bank and HDFC Bank.
Fig 1: Net NPA Ratios of ICICI Bank and HDFC Bank.
V. RESEARCH METHODOLOGY
This research has been descriptive in nature. Secondary Testing of Hypothesis
data for the period 2009-2014 has been retrieved from the
reports published by Reserve Bank of India. Top two Null Hypothesis (H0)-
private sector banks have been considered for the present
study. The data has been analyzed by using tables and There is no significant difference in Net NPAs ratio of
graphs, descriptive statistics and independent t-test. ICICI Bank and HDFC Bank. T-test has been applied to
check the null hypothesis using SPSS and the results have
Table 1: Net NPA Ratios of ICICI and HDFC Bank (In %) been followed as under:
Year ICICI Bank HDFC Bank

2009 2.09 0.63 Table: 2 t-statistics for ICICI Bank and HDFC Bank
2010 2.12 0.31
2011 1.11 0.19 Std.
Banks Mean t-statistics
Deviation
2012 0.73 0.18
2013 0.77 0.20
ICICI 1.2733 .65796 4.740
2014 0.82 0.27
Source: Reserve Bank of India Reports HDFC .2967 .17108 4.248

Table 1 depicted that ICICI Bank has continuously The above table: 2 depicted the t-test score of ICICI bank
improved its asset quality from year 2010 to 2014whilst and HDFC bank. The t- test value for both the banks has
various fluctuations have been observed in Net NPAs of been greater than the table value of t-test i.e. 1.96 at 95
HDFC Bank. The ratio of Net NPAs to Net Advances of percent confidence interval. As the calculated value found
ICICI bank has reduced from 2.12 percent to 0.73 percent greater than the table value, the null hypothesis has been
in 2012 whilst it has increased from 0.73 percent in 2012 to rejected and it has been stated that there exist a significant
0.82 percent in 2014. Moreover, in case of HDFC bank the difference between NPAs of both the banks selected for the
Net NPAs ratio has decreased from 0.63 percent in 2009 to study during the selected time period (2009-2014).
0.19 percent in 2011 i.e. the asset quality has improved in
the above said time period. Further, the ratio has increased
from 0.18 percent in 2012 to 0.27 percent in 2014.

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Special Issue - 2017 International Journal of Engineering Research & Technology (IJERT)
ISSN: 2278-0181
NCIETM - 2017 Conference Proceedings

VI. FINDINGS AND CONCLUSIONS

In nutshell, it has been concluded that HDFC Bank has
performed well due to very less amount has been blocked
in form of NPAs. Presently, it has only 0.63 percent NPAs
in proportion to net advances whilst ICICI Bank has 2.09
percent NPAs which is much higher as compared to HDFC
Bank. In the same way, the significant difference in the
level of NPAs has also been observed using t- test score.
Moreover, it could be suggested that banks must focus on
the borrowers credibility before sanctioning loans to them
and strict procedures should be followed before lending to
the customers so as to be more safe in terms of quality
assets.

REFERENCES
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[3] Ramesh.K.V, Sudhakar.A, “NPA Management in Public
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