A trend analysis of non performing assets (np as) of selected commercial banks in india

1. A Trend Analysis of Non-
Performing Assets (NPAs) of
Selected Commercial Banks in India

2. INTRODUCTION
Non-performing assets (NPAs) is affecting the
performance of the credit institutions both
financially and psychologically.
• Prevents or delays recycling of funds.
• Denies income from the asset by way of
interest
• Decreases profit by way of provisions.

3. • NPA is a disorder resulting in non-performance
of a portion of loan portfolio leading to
• No recovery or less recovery / income to the
lender.
• NPAs represent the quantified “Credit Risk”.
• It also affects the mental capability of the
banker towards lending

4. • NPAs are an inevitable burden on the banking
industry.
• Hence, the success of a bank depends upon
the methods of managing NPAs and keeping
them within tolerance level.

5. Aim of the study
• To analyze the trends in NPAs
• Gross and net NPAs as a percentage of gross
advances and net advances,
• Gross and net NPAs as a percentage of Total
Assets respectively.

6. METHODOLOGY
• Secondary data have been used
• The study spans the period starting from
2003-2004 to 2012-2013.
• The data from Reserve Bank of India(RBI)
bulletins, statistical tables relating to banks in
India
• Report on trend and progress of banking in
India, issued by the RBI.

7. CONCEPTUAL FRAMEWORK OF NPAs
• On the recommendations of the Narashimam
Committee in the year 1992-93.
• As per the RBI norms an asset is considered as
“Non performing” if the asset ceases to
generate income for more than 90 days
period.
• With a view to moving towards international
best practices

8. • Interest and /or installment of principal remain
overdue for a period of more than 90 days, in
repect of a term loan.
• The account remain out of order, in respect of
overdraft/cash credit.
• The bill remain overdue for a period of more than
90 days in case of bill purchased and discounted.
• interest and or installment of principal remains
overdue for two harvest seasons but for a period
not exceeding two half years in the case of an
advance granted for agricultural purposes.

9. Provisions Requirements
Period for which the advance has
remained in Doubtful category
Provision requirements (%)
Up to one year 20
One to three years 30
More than three years
I. Outstanding stock of NPAs as on
March31,2004
- 60 percent with effect from March31,2005
-75 percent with effect from March 31,
2006.
-100 percent with effect from March31,2007
II.Advances classified as doubtful for
more than three years on or after
April1,2004
100 percent with effect from March 31,2005

10. Reasons for NPAs in Banks
• Internal Factors
• Diversion of funds for
 Expansion/diversification/modernization.
 Taking up new projects.
 Helping/promoting associate concerns.
• Time/cost overrun during the project implementation.
• Inefficient management.
• Strained labour relations.
• Inappropriate technology/technical problems.
• Product obsolescence, etc.
• Poor credit Appraisals, monitoring and follow up

11. External Factors
• Recession.
• Input or power shortage.
• Price escalation.
• Exchange rate fluctuation.
• Accidents and natural calamities.
• Changes in government policy.
• Willful defaulters have been there because they
knew that legal recourse available to the lenders
is time consuming and slow.

12. ANALYSIS OF PERFORMANCE WITH
REFERENCE TO NPAS
NET NPAs/ NETADVANCES RATIO and NETNPAs TO TOTALASSETS RATIO
NNPA/NADV NNPA/T.ASSETS
Year SBI PNB CBI SBI PNB CBI
2003-2004 6.03 6.74 9.72 2.35 2.95 3.87
2004-2005 5.63 5.32 7.98 1.96 2.48 3.23
2005-2006 4.5 3.86 6.74 1.58 1.77 2.74
2006-2007 3.48 0.98 5.57 1.33 0.44 2.01
2007-2008 2.65 0.2 2.98 1.16 0.1 1.2
2008-2009 1.9 0.3 2.59 0.99 0.1 1.3
2009-2010 1.56 0.76 1.7 0.93 0.4 0.9
2010-2011 1.78 0.64 1.45 1 0.4 0.9
2011-2012 1.79 0.17 1.24 1 0.1 0.7
2012-2013 1.72 0.53 0.69 1.03 0.33 0.4
Source: Compiled from Statistical Tables Relating to Banks in India, Various issues

13. Sector-Wise Classification of NPAs of SBI
Year Priorit
y
Sector
% Public
Sector
NPAs
% Non
Priority
Sector
NPAs
% Total
NPAs
%
2003-04 6876.32 44.44 1090.4 7.05 7506.26 48.51 15472.98 100
2004-05 6942.42 44.83 506.4 3.27 8037.05 51.90 15485.87 100
2005-06 6171.23 46.55 381.2 2.88 6704.84 50.57 13257.27 100
2006-07 5764.83 48.70 109.06 0.92 5963.02 50.38 11836.91 100
2007-08 5604.68 48.12 90.32 0.78 5952.43 51.11 11647.43 100
2008-09 5906.49 57.51 33.2 0.32 4329.83 42.16 10269.52 100
2009-10 5810.19 58.86 149.32 1.51 3911.5 39.63 9871.01 100
2010-11 7561.28 60.12 91.16 0.72 4923.64 39.15 12576.08 100
2011-12 7010 46.41 163 1.08 7932 52.51 15105 100
2012-13 9073 50.87 235 1.32 8529 47.82 17837 100
r * 0.82 0.51 0.94
r** -0.54 0.39 0.52
r* =Coefficient of Correlation between the amounts of different sectors to the total amounts.
r** =Coefficient of Correlation between the proportion of different sectors to the total amounts.

14. Sector-Wise Classification of NPAs of PNB
Year Priority
Sector
% Public
Sector
NPAs
% Non Priority
Sector NPAs
% Total
NPAs
%
2003-04 1419.98 41.04 46.6 1.35 1993.52 57.61 3460.1 100
2004-05 1728.31 41.75 59.43 1.44 2352.12 56.82 4139.86 100
2005-06 2039.91 40.96 35.72 0.72 2904.43 58.32 4980.06 100
2006-07 1979.17 42.38 65.12 1.39 2625.84 56.23 4670.13 100
2007-08 1740.76 46.53 39.52 1.06 1961.06 52.42 3741.34 100
2008-09 1809.55 57.66 34.16 1.09 1294.57 41.25 3138.28 100
2009-10 2511.6 74.08 90.16 2.66 788.51 23.26 3390.27 100
2010-11 2761.59 83.20 52.84 1.59 504.87 15.21 3319.3 100
2011-12 2436 88.01 1 0.04 331 11.96 2768 100
2012-13 2471 76.88 4 0.12 739 22.99 3214 100
r* -0.33 0.37 0.90
r** -0.84 0.16 0.83
r* =Coefficient of Correlation between the amounts of different sectors to the total amounts.
r** =Coefficient of Correlation between the proportion of different sectors to the total amounts.

15. Sector-Wise Classification of NPAs of CBI
Year Priority
Sector
% Public
Sector
NPAs
% Non
Priority
Sector NPAs
% Total
NPAs
%
2003-04 1583.6 48.68 26.96 0.83 1642.77 50.50 3253.33 100
2004-05 1708.99 50.63 25.01 0.74 1641.69 48.63 3375.69 100
2005-06 1721.04 53.06 123 3.79 1399.41 43.15 3243.45 100
2006-07 1724.59 55.78 21.14 0.68 1346.19 43.54 3091.92 100
2007-08 1585.44 60.48 12.71 0.48 1023.26 39.03 2621.41 100
2008-09 1597.68 59.52 6.47 0.24 1080.03 40.24 2684.18 100
2009-10 1598.86 62.16 10.15 0.39 962.97 37.44 2571.98 100
2010-11 1651.44 70.28 0.81 0.03 697.59 29.69 2349.84 100
2011-12 1587 68.38 59 2.54 675 29.08 2321 100
2012-13 1658 67.45 8 0.33 792 32.22 2458 100
r* 0.53 0.39 0.98
r** -0.97 0.31 0.94
r* =Coefficient of Correlation between the amounts of different sectors to the total amounts.
r** =Coefficient of Correlation between the proportion of different sectors to the total amounts.

16. Priority Sector NPAs of SBI
Year Agriculture % SSI % Others % Total
Priority
Sector
%
2003-04 2351.18 34.19 2898.42 42.15 1626.72 23.66 6876.32 100
2004-05 2520.49 36.31 2794.22 40.25 1627.71 23.45 6942.42 100
2005-06 2369.39 38.39 2302.57 37.31 1499.27 24.29 6171.23 100
2006-07 2124.26 36.85 1741.07 30.20 1899.5 32.95 5764.83 100
2007-08 1912.68 34.13 1371.97 24.48 2320.03 41.39 5604.68 100
2008-09 1929.21 32.66 1238.89 20.98 2738.39 46.36 5906.49 100
2009-10 1977.18 34.03 1074.78 18.50 2758.23 47.47 5810.19 100
2010-11 2915.12 38.55 1260.11 16.67 3386.05 44.78 7561.28 100
2011-12 1789 25.52 1712 24.42 3509 50.06 7010 100
2012-13 2322 25.59 2168 23.90 4583 50.51 9073 100
R 0.48 0.34 0.68
R² 0.23 0.12 0.46
r = Coefficient of Correlation,R2 =Coefficient of Determination

17. Priority Sector NPAs of PNB
Year Agriculture % SSI % Others % Total
Priority
Sector
%
2003-04 384.81 27.10 568.88 40.06 466.29 32.84 1419.98 100
2004-05 443.9 25.68 687.09 39.76 597.32 34.56 1728.31 100
2005-06 512.23 25.11 929.91 45.59 597.77 29.30 2039.91 100
2006-07 474.05 23.95 928.17 46.90 576.95 29.15 1979.17 100
2007-08 354.46 20.36 908.3 52.16 478.6 27.48 1741.36 100
2008-09 432.17 23.88 796.94 44.04 580.5 32.08 1809.61 100
2009-10 647.39 25.78 991.32 39.47 872.89 34.75 2511.6 100
2010-11 1011.61 36.63 910.51 32.97 839.47 30.40 2761.59 100
2011-12 537 22.04 1000 41.05 899 36.90 2436 100
2012-13 977 39.55 1165 47.17 328 13.28 2470 100
r 0.84 0.76 0.56
R² 0.73 0.41 0.26
r = Coefficient of Correlation,R2 =Coefficient of Determination

18. Priority Sector NPAs of CBI
Year Agricultu
re (i)
% SSI(ii) % Others(ii
i)
% Total
Priority
Sector
%
2003-04 346.78 21.90 737.71 46.58 499.11 31.52 1583.6 100
2004-05 396.34 23.19 789.37 46.19 523.28 30.62 1708.99 100
2005-06 441.1 25.63 746.75 43.39 533.19 30.98 1721.04 100
2006-07 459.78 26.66 683.39 39.63 581.42 33.71 1724.59 100
2007-08 356.34 22.48 627.55 39.58 601.55 37.94 1585.44 100
2008-09 413.39 25.87 607.46 38.02 576.83 36.10 1597.68 100
2009-10 450.67 28.19 519.47 32.49 628.72 39.32 1598.86 100
2010-11 535.83 32.45 636.3 38.53 479.31 29.02 1651.44 100
2011-12 417 26.26 659 41.50 512 32.24 1588 100
2012-13 421 25.39 922 55.61 315 19.00 1658 100
r 0.40 0.46 -0.16
R² 0.08 0.30 0.04
r = Coefficient of Correlation,R2 =Coefficient of Determination

19. CONCLUSION
• The credit management skills have become more
important for improving the bottom-line of the
banking sector.
• The various global risks associated with the banking
industry will expose the credit assets to greater risks
while serious efforts need to be taken for recovery
measures.
• Banks need to be equipped with necessary risk
appraisal system to minimize credit defaults.
• Several experiments have been tried to curb NPAs (viz.,
BIFR/SICA, lok adalats, DRTs, OTS, SARFAESI etc) but
nothing has hit the mark in tackling NPAs.

20. Suggestions
• Improving the recovery management
• Monitoring accounts
• Keeping regular contact with borrowers
• Fixing recovery targets
• Arranging recovery camps
• BOD are the key players in the management of
banks but they are granted little autonomy.
• The nominees of Government /RBI dominate the
banks boards due to their vast powers.

21. • Upgrading Technology
 Computerization can further help the management in
getting required information in order to take proper
decisions while granting loans/advances.
• Inculcating ethics in borrowers
 NGO’s and other voluntary organizations to educate
the borrowers regarding the importance of timely
repayment of credit.
• A separate statement should be made so that all
stakeholders are aware to what extent their profits
were affected due to the write-off.

22. • Credit information Bureau of India Limited
(CIBIL) it was set up in the year 2001, by SBI,
HDFC, and two foreign technology partners.

23. REFERENCES
• http://rbi.org.in.
• https://rbi.org.in/Scripts/PublicationsView.asp
x?id=15518
• http://iba.org.in
• Report on Trend and Progress of banking in
India, Various Issues.
• Statistical Tables relating to Banks in India,
Various Issues.