NPA Project PPT (Corrected)

A Grand Project onNon Performing Assets Comparative

analysis of Private Sector Bank & Public Sector BankSubmitted to

Gujarat University

Under the guidance ofMs. Rajeswari Parmar Assistant Professor

PARUL INSTITUTE OF BUSINESS ADMINISTRATION

BBA PROGRAMME

PREPARED BY:

1. Juhi Patel2. Mokshesh Chhajed3. Neetu Dalmia4. Pratibha Jain5. Sheetal Sharma6. Vatsal Kothari

MEANING OF NPA

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 RBI.

An amount due under any credit facility is treated as "past

due" when it has not been paid within 90 days from the

due date.

CLASSIFICATION OF NPAA. Standard (Assets): These are loans which do not have any problem are less

risk.B .Substandard (Assets): These are assets which come under the category of NPA

for a period of less than 12 months.C. Doubtful (Assets): These are NPA exceeding 12 months.D. Loss (Assets): Where loss has been identified by the bank or internal or

external auditors or the RBI inspection but the amount has not been written off wholly.

OBJECTIVES OF THE STUDY

To study the datas of NPAs of last three years in public as

well in private sector banks

To identify the factors affecting NPA

To find out the effectiveness of recovery mechanism

adopted by banks for NPA

To offer suggestions based on the study

To find out the profitability of the banks

LITERATURE REVIEW

Nelson M. Waweru: Study that many financial

institutions that collapsed in Kenya Since 1986 due to

non performing loans, this study investigated the

causes of non performing loans, the actions that bank

managers have taken to mitigate that problem and the

level of success of such actions.

CONTD.. Kevin Greenidge, The purpose of this paper is to build a

multivariate model, incorporating macroeconomic and

bank-specific variables, to forecast non-performing loans

in the banking sector of Barbados. On an aggregate level,

our model outperforms a simple random Walk model on

all forecast horizons, while for individual banks; these

forecasts tend to be more accurate for longer prediction

periods only.

RESEARCH METHODOLOGY

1. Primary Data:

The datas collected were analyzed with the help of questionnaire and

these questionnaires are filled by three public banks and three private

banks.

The tables are used to represent the consolidated data. The graphical

representation is also used for better comprehension and presentation.

2. Secondary Data:

We collected secondary data through RBI website.

POPULATION

There are around 21 public sector banks and 19

private sector banks.

SAMPLE SIZE

We took the sample of three public banks and three private banks.

The public banks which we selected as sample are as follows:

SBI Bank

Allahabad Bank

Bank of Baroda

The private banks which we selected as sample are as follows:

YES Bank

HDFC Bank

Kotak Mahindra Bank

SAMPLING TECHNIQUE

We have used Convenient sampling from the non

probability sampling method, which is included in the

types of sampling methods.

DATA ANALYSIS TOOL

We have use “EXCEL” as data analysis tool.

DATA ANALYSIS

1. Policy Adopted

Private sector Bank Public Sector Bank

66.67

33.33

IRMDRMPORMIT

33.33

66.67

IRMDRMPORMIT

IRMD – Integrated Risk Management Division RMP – Risk Management Policy ORM – Operational Risk Management IT – Information Technology

2. Measurement of NPA

Private Sector Bank Public Sector Bank

66.67

33.33

EARLY STAGEALERT STAGEADVANCE STAGE

33.33

33.33

33.33

EARLY STAGEALERT STAGEADVANCE STAGE

3. Progress in NPA

Private Sector Bank Public Sector Bank

33.33

66.67

POOR SLOW

MODERATE GOOD

33.33

66.67

POORSLOWMODERATEGOOD

4. Quantum of losses

Private Sector Bank Public sector bank

100

LESSTHAN 25%25-50%50%-75%ABOVE-75%

100

LESSTHAN 25%25-50%50%-75%ABOVE-75%

5. Precautions adopted

Private Sector Bank Public Sector bank

33.33

66.67

COLLATERAL GUARANTEE

GUARANTEE AND ANY OTHER SE-CURITY

COLLATERAL SE-CURITY MEASURES

OTHERS

33.33

66.67

COLLATERAL GUARANTEEGUARANTEE AND ANY OTHER SE-CURITYCOLLATERAL SE-CURITY MEASURESOTHERS

HYPOTHESES TESTING

We have used F-test calculation as hypotheses testing for

the calculation of NPA of both sectors.

The datas are of last 3years.

The source from where data has been collected is

www.iba.in

iba (Indian banking association)

Net NPA calculation of public and private sector banks:1. Public sector banks (in crore)

BANK 2011 2012 2013

Allahabad

Bank

736 1092 4172

SBI 12347 15819 21956

BOB 791 1544 4192

Total 13874 18455 30320

2. Private sector banks (in crore)

BANK 2011 2012 2013

HDFC 296 352 469

KOTAK

Mahindra

211 237 311

YES Bank 9 17 7

Total 516 606 787

H0=There is no significance difference in NPA of public and private sector banks.H1=There is significance difference in NPA of public and private sector banks

F-Test Two-Sample for Variances

  Public Bank Private Bank

Mean 20883 636.3333333

Variance 72039117 19050.33333

Observations 3 3

Df 2 2

F 3781.51478

P(F<=f) one-tail 0.00026437

F Critical one-tail 19

CONCLUSION

F cal> F tab

3781.51 > 0.00

Here F calculated value is more than the F tabulated value

so here Hypotheses is rejected.

So we can say that there is significant difference in net

NPA of public and private sector banks.

FINDINGS

There is an impact of NPA on the profitability of the bank.

There is a significant difference in the NPA of public

sector and private sector banks.

The main internal factors affecting NPA in private sector

banks are : improper credit appraisal, lack of effective

follow-up , excessive overdraft lending , lack of post

credit supervision.

CONTD..

The main external factors affecting private sector banks

are: natural calamities,industrial sickness, business failure.

The main internal factors affecting NPA in public sector

banks are : Excessive Overdraft Lending, Lack of

Effective Follow-up ,Absence of Security, Obsolete

Technology, Willful Default/Fraud.

CONTD.. The main external factors affecting public sector banks are

: Natural Calamities, Industrial sickness, Business

failure,Labour Problems of Borrowed Firms.

The recovery mechanism adopted by the private sector

banks are as follows : Outsourcing, Recovery Campus,

One-time-settlement Scheme, Self involvement, Corporate

Restructuring.

CONTD.. The recovery mechanism adopted by the public sector

banks are as follows: One-time-settlement Scheme, Self

involvement, Corporate Restructuring, SARFAESI Act.

CONCLUSION

Growing NPAs is one of the biggest problems that the

banks are facing today. If proper management of the NPAs

is not undertaken it would hamper the efficiency of the

banks. If the concept of NPAs is taken very lightly it

would be dangerous for the banking sector. The NPAs

destroy the current profit and interest income and affect

the smooth functioning of the recycling of the funds.

CONTD.. Banks also redistribute losses to other borrowers by

charging higher interest rates. Lower deposit rates and

higher lending rates repress savings and financial markets,

which in turn hampers the economic growth of the

country. Thus, it is highly essential for the banks to focus

their attention on growth of NPAs and take appropriate

measures to regulate their growth.

REFERENCES

1)Retrieved from:

http://rbi.org.in/scripts/AnnualPublications.aspx?

head=Trend and Progress of Banking in India .

2) Retrieved from:

http://rbi.org.in/scripts/AnnualPublications.aspx?

head=Statistical Tables Relating to Banks of India.

3) Retrieved from:

http://rbi.org.in/scripts/NotificationUser.aspx.

CONTD..

4) Retrieved from:

http://en.wikipedia.org/wiki/Banking_in_India

5) Retrieved from:

http://www.ibef.org/industry/Banking.aspx

6) Retrieved from:

http://www.bankingindiaupdate.com/general.html