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

50 %
50 %
Information about A trend analysis of non performing assets (np as) of selected...

Published on January 2, 2017

Author: albertramanujan

Source: slideshare.net

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.

Add a comment

Related pages

A Comparative Analysis of Non- Performing Assets (NPAs) of ...

A Comparative Analysis of Non- Performing Assets (NPAs) of Selected Commercial Banks in India Samir * ... This part of the paper focuses on trend analysis of NPAs
Read more

Assets Classification and Trends of Nonperforming Assets ...

performing Assets in selected commercial banks in India . 2. To give necessary suggestions to the Commercial ... A comparative trend analysis of Non-Performing Assets of
Read more

NON PERFORMING ASSETS AND PROFITABILITY OF COMMERCIAL ...

NON PERFORMING ASSETS AND PROFITABILITY OF COMMERCIAL BANKS ... The second part presents a trend analysis ... effect from March 31, 2004, a non-performing asset ...
Read more

A Comparative study of Non Performing Assets in Public and ...

Non-performing assets are one of the major concerns for banks in India. ... the trend and magnitude of NPAs in selected Indian banks. ... the commercial banks
Read more

Comparative Evaluation of Non Performing Assets of Indian ...

Comparative Evaluation of Non Performing Assets of Indian Banks: ... As per the trend analysis of gross NPAs, ... Selected Commercial Banks in India.
Read more

A Study on Analyzing the Trend of NPA Level in Private ...

A Study on Analyzing the Trend of NPA Level in Private ... Private sector Banks, Non- Performing Asset ... Strategies for Commercial Banks in India.
Read more

A COMPARATIVE STUDY OF LOAN PERFORMANCE, NPA AND NET ...

advances of Nationalized Commercial Banks ... on the comparative study of Non Performing Assets in India in the ... been done through trend analysis for
Read more

Forecasting the Trends of NPAs in Indian Banking Sector

... of credit schemes of selected banks for five years. The analysis was ... Non-Performing Assets ... change in the private banks NPA level. The trend analysis ...
Read more