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Comparative Study On Non Performing Assets Between Public & Private Banks

This document presents a comparative study of non-performing assets (NPAs) between public and private banks in India. It discusses the introduction and objectives of the study, research methodology used, causes of NPAs, data analysis of past NPA trends in different bank groups, and potential solutions to manage NPAs. The conclusion emphasizes understanding macroeconomic variables, systemic issues, and learning from foreign experiences to create a suitable solution for NPAs in India.

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57 views27 pages

Comparative Study On Non Performing Assets Between Public & Private Banks

This document presents a comparative study of non-performing assets (NPAs) between public and private banks in India. It discusses the introduction and objectives of the study, research methodology used, causes of NPAs, data analysis of past NPA trends in different bank groups, and potential solutions to manage NPAs. The conclusion emphasizes understanding macroeconomic variables, systemic issues, and learning from foreign experiences to create a suitable solution for NPAs in India.

Uploaded by

rahul201111
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Comparative study on non

performing assets between


public & private banks
presented by

Rahul Singh Rajput


MBA iv Sem
Contents:
 Introduction of the MRP
 Details of the project
 Causes of the NPA
 Tools of the study
 Data analysis of NPA
 Solutions for NPAs
 Conclusion
INTRODUCTION:

 Non Performing Asset means an asset or account of


borrower, which has been classified by a bank or
financial institution as sub-standard, doubtful or loss
asset, in accordance with the directions or guidelines
relating to asset classification issued by The Reserve
Bank of India
Conti…..
Ninety days overdue:-
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 from March 31,
2004, a non-performing asset (NPA) shall be a loan
or an advance where
Conti…
 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
Conti…
Out of order:-
An account treated as 'out of order' if the outstanding
balance remains continuously in excess of the
sanctioned limit/ drawing power. In case where the
outstanding balance in the principal operating account
is less than the sanctioned limit/ drawing power, but
there are no credits continuously for six months as on
the date of balance sheet or credits are not enough to
cover the interest debited during the same period,
these account should be treated as 'out of order.
Asset Classification:

 The RBI has issued guidelines to banks for


classification of assets into four categories.
 Standard assets:-These are loans which do not have
any problem are less risk
 Substandard assets:-These are assets which come
under the category of NPA for a period of less than 12
months.
 Doubtful assets: These are NPA exceeding 12 months
 Loss assets: These NPA which are identified as
unreliable by internal inspector of bank or auditors or
by RBI. The classification of assets of scheduled
commercial bank.
DETAILS OF THE PROJECT:

1.OBJECT OF THE STUDY:


 To evaluate NPAs (Gross and Net) in private and public
banks.
 To study the past trends of NPA.
 To calculate the weighted of NPA in risk management in
Banking
 To analyze financial performance of banks at different level of
NPA
2.RESEARCH METHODOLOGY:

 In this project, descriptive research methodologies were used.


 At the first stage theoretical study is attempted.
 At the second stage, historical study is attempted.
 At the final stage, comparative study of NPA is undertaken.
Scope of the study:

 Concept of Non-Performing Asset


 Guidelines
 Comparative study
 Impact of NPAs
 Reasons for NPAs
 Preventive Measures
 Tools to manage NPAs
Limitations:

 1.It was critical for me to gather the financial data of the every
bank of the public sector banks so the better evaluation of the
performance of the banks are not possible.
 2.since my study is based on the secondary data,the practical
operations as related to the NPAs are adopted by the banks are
not learned.
 3.since the indian banking sector is so wide so it was not
possible for me to cover all the banks of the indian banking
sector.
Causes of the NPA:

 1-Internal factors:
 Funds borrowed for a particular purpose but not use for the said purpose.
 Project not completed in time.
 Poor recovery of receivables.
 Excess capacities created on non-economic costs.
 In-ability of the corporate to raise capital through the issue of equity or
other debt instrument from capital markets.
 Business failures.
 Diversion of funds for expansion\modernization\setting up new projects\
helping or promoting sister concerns.
 Willful defaults, fraud, disputes, management disputes, misappropriation
etc.,
 Deficiencies on the part of the banks viz. in credit appraisal, monitoring
and follow-ups, delay in settlement of payments\ subsidiaries by
government bodies etc.,
2-External factors:

 Sluggish legal system - Long legal tangles Changes


that had taken place in labour laws Lack of sincere
effort.
 Scarcity of raw material, power and other resources.
 Industrial recession.
 Shortage of raw material, raw material\input price
escalation, power shortage, industrial recession, excess
capacity, natural calamities like floods, accidents.
 Failures, nonpayment\ over dues in other countries,
recession in other countries, externalization problems,
adverse exchange rates etc. Government policies like
excise duty changes, Import duty changes etc.,
Data analysis of NPA:
6-Movements in Non-performing Assets - Bank Group-wise
1.
Movement in CRAR and NPAs of Scheduled
Commercial Banks:-
Percent Distribution of NPAs of State cooperative
bank
By the graph,
By the graph,
By the graph,
By the graph,
Solution of the NPA:

 1-Don’t Eliminate – Manage!


 2-Effectiveness of ARCs:-
 -Well Developed Capital Markets:-
 4-Contextual Decision making:-
 5-Securitization
 6-Effects of Capital Norm tightening
 7-Realignment of Performance metrics:-
 8-Consistency of purpose!:-
 9-Legal Issues:-
CONCLUSION:

 The study stresses the importance of a sound understanding of


the macroeconomic variables and systemic issues pertaining to
banks and the economy for solving the NPA problem along
with the criticality of a strong legal framework and legislative
framework. Foreign experiences must be utilized along with a
clear understanding of the local conditions to create a tailor
made solution which is transparent and fair to all stakeholders.

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