UNIVERSITY OF CALCUTTA

Project Report
Submitted for the Degree of B.Com Honours in Accounting & FinanceUnder the
University of Calcutta
Topic of the Project
“NPA MANAGEMENT”
Title of the Project
“AN ANALYTICAL STUDY OF NPA OF PUBLIC
SECTOR AND PRIVATE SECTOR BANKS”

Submitted by:
Name of the Candidate: SIBAPRASAD JANA
C U Registration No: 412-1111-0469-22
C U Roll No: 221412-21-0104
College Roll No: ECH-057-2022

Supervised by:

Name of the Supervisor: ARIJIT BANERJEE

Name of the College:

SHIBPUR DINOBUNDHOO INSTITUTION (COLLEGE)

Month & Year of submission : MAY 2025

 ACKNOWLEDGEMENT
It is a matter of great pleasure to present this project on

“NPA MANAGEMENT
ANANALYTICAL STUDY OF NPA OF PUBLIC SECTOR AND PRIVATE SECTOR
BANKS”

I take this opportunity to thank our respected Principal Dr. MANIDEEP

CHANDRA for giving me an opportunity towork on this field.

I am very thankful to my Supervisor ARIJIT BANERJEE for his full support in

completing this project work.

Finally, I am grateful to acknowledge my family and friends and all the

teachers who filled the questionnaire providing me full support and co-
ordination without which this project wouldn’t be possible.

Name of Student
SIBAPRASAD JANA

Page 1
 Annexure- I SUPERVISOR’S CERTIFICATE

This is to certify that SIBAPRASAD JANA a student of B.Com Honours in

Accounting & Finance of SHIBPUR DINOBUNDHOO INSTITIUTION
( COLLEGE )under the University of Calcutta has worked under my
supervision and guidance for his Project Work and prepared a Project Report with
the title
NPA MANAGEMENT AN ANALYTICAL STUDY OF NPA OF PUBLIC SECTOR AND
PRIVATE SECTOR BANKS

The Project report, which he is submitting, is his genuine and original work to the
best of my knowledge.

Place : HOWRAH Signature :

Date : Name : ARIJIT BANERJEE
Designation : LECTURER OF
COMMERCE
Name of the College :
SHIBPUR
DINOBUNDHOO INSTITUTION

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 Annexure- II STUDENT’S DECLARATION

I hereby declare that the Project Work with the title NPA MANAGEMENT AN
ANALYTICALSTUDY OF NPA OF PUBLIC SECTOR AND PRIVATE SECTOR
BANK submitted by me for the partial fulfillment of the degree of B.Com.
Honours in Accounting & Finance underthe University of Calcutta is my original
work and has not been submitted earlier to any other University / Institution for
the fulfillment of the requirement for any course of study.
I also declare that chapter of this manuscript in whole or in part has been
incorporated in this report from any earlier work done by others or by me.
However, extracts of any literature which has been used for this report has been
duly acknowledged providing details of such literature in the references
Signature :
Place : HOWRAH Name : SIBAPRASAD JANA
Date :
Address : 13 PANCHANANTALA 4TH BYE LANE , THANAMAKUA,
HOWRAH - 711102
C.U. Registration No. 412-1111-0469-22 C.U. Roll No. 221412-21-0104

Page 3
 TABLE OF CONTENTS/INDEX

CHAPTERS TOPICS PAGE NO.

Acknowledgement 1

Supervisor’s Certificate 2

Student’s Declaration 3

CHAPTER-1 Background 6
INTRODUCTION Justification of the study 8

Brief Review of Literature 10

Objectives of the Study 12
Methodology of the Study 13
Limitations of the Study 16

Chapter Planning 17
CHAPTER-2 Concepts/Different 19
CONCEPTUAL terminologies
FRAMEWORK National Scenario 22
International Scenario
CHAPTER-3 Presentation of Data, 28
PRESENTATION AND Application of Statistical Tool
DATA ANALYSIS and Interpretation

Findings 44

CHAPTER-4 Conclusion 46
CONCLUSION AND Recommendations 47
RECOMMENDATIONS

Bibliography /References 48

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 CHAPTER:- 1

1. INTRODUCTION

The banking industry has undergone a sea change after the first phase of economic
liberalization in 1991 and hence credit management. Asset quality was not prime
concern in Indian banking sector till 1991, but was mainly focused on performance
objectives such as opening wide networks/branches, development of rural areas,
priority sector lending, higher employment generation, etc. While the primary
function of banks is to lend funds as loans to various sectors such as agriculture,
industry, personal loans, housing loans etc.,but in recent times the banks have become
very cautious in extending loans. The reason being mounting nonperforming assets
(NPAs) and nowadays these areone of the major concerns for banks in India. NPA
(non-performing assets) is related to banking and finance term. When bank or
finance company is unable to recover its lent money from borrower in 90 days than
that amount which have not been recovered will be treated as NPA.

A Non-performing asset can be elucidated as a credit facility in respect of which the

interest and/or installment of principle has remained „past due‟ for a specific period of
time. It refers to a classification for loans on books of financial institutions that are
in default or are in arrears on scheduled payments of principal or interest.

“An asset should be classified as non-performing, if the interest and/or principle

amount has not been received or remained outstanding for one quarter from theday
such income/ installment have fallen due.” With a view to moving towards
international best practices and to ensure greater transparency, it has been decided to
adopt the „90 days‟ over dues norm for identification of NPAs from the year ending
March 31, 2004. Accordingly, witheffect from March 31,2004; a NPA is a loan or an
advance where: Interest and/or installment of principle remain overdue for a period of
more than90 days in respect for a term loan; The account remains „out of order‟ in
respect of an overdraft or cash credit;

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 A. BACKGROUND OF THE PROJECT

The NPA meaning in banking is any asset that fails to perform and cannot generate
revenue for the bank. Loans are assets for banks as the interest that the borrower
pays to the bank is their source of income. Any consumer who fails to pay the
interest is categorised as “non-performing” by the bank as they fail to meet their
obligations.

To regulate the norms in concurrence, banks take 90 days to identify an asset as a

non-performing asset. This asset affects the banking system. Banks run for profit,
which eventually affects the economy. Furthermore, such assets eat into the margin
for banks.

The banks, in their books, have different kind of assets, such as cash in hand,
balances with other banks, investment, loans and advances, fixed assets and other
assets. The Non Performing Asset (NPA) concept is restricted to loans, advances
and investments. As long as an asset generates the income expected from it and
does not disclose any unusual risk other than normal commercial risk, it is treated
as performing asset, and when it fails to generate the expected income it becomes a
“Non Performing Asset”. In other words, a loan asset becomes a Non Performing
Asset (NPA) when it ceases to generate income, i.e. interest, fees, commission or
any other dues for the bank for more than 90 days.

A NPA is an advance where payment of interest or repayment of installment on

principal or both remains unpaid for a period of two quarters or more and if they
have become ‘past due’. An amount under any of the credit facilities is to be
treated as past due when it remain unpaid for 30 days beyond due date.

Non Performing Assets are also called as Non Performing Loans. It is made by a
bank or finance company on which repayments or interest payments are not being
made on time. A loan is an asset for a bank as the interest payments and the
repayment of the principal create a stream of cash flows. It is from the interest
payments that a bank makes its profits. Banks usually treat assets as non-

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 performing if they are not serviced for some time. If payments are late for a short
time, a loan is classified as past due and once a payment becomes really late
(usually 90 days), the loan is classified as non-performing. A high level of non-
performing assets, compared to similar lenders, may be a sign of problems.

LIST OF SOME PUBLIC AND PRIVATE SECTOR BANKS IN

INDIA 2023

PUBLIC SECTOR BANKS (2025)

1. State Bank of India

2. Punjab National Bank

3. Central Bank of India

4. Bank of India

5. UCO Bank

PRIVATE SECTOR BANKS (2025)

1. HDFC Bank

2. AXIS Bank

3. ICICI Bank

4. Kotak Mahindra Bank

5. IDFC FIRST Bank

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 B. JUSTIFICATION OF THE PROJECT

Non-performing assets are listed on the balance sheet of a bank or some other
financial institution. After an extended period of non-payment, the lender forces
the borrower to liquidate any assets that were vowed as part of the debt agreement.
If there are no such assets, the lender might write off the asset as a bad debt and
sell it at a discount to any collection agency.

In most cases, debt is classified as non-performing when loan payments have not
been made for 90 days. While 90 days is usually the standard, the amount of
passed time may be shorter or longer based on the terms and conditions of each
loan. A loan can be classified as a non-performing asset at any point during
the term of the loan or at its maturity.

NPAs of the banking sector dropped below 6% as of March 2024. According to

RBI, Bank NPAs may go beyond 8% by September 2024.

When the borrower stops paying interest or principal on a loan, the lender will lose
money. Such a loan is known as Non-Performing Asset (NPA). Indian Banking
industry is seriously affected by Non-Performing Assets. Any asset which stops
giving returns to its investors for a specified period of time is known as Non-
Performing Asset (NPA).

The major concern for banks in India is Non-performing assets. Performance of the
banks is reflected through NPA. Larger NPA reflects credit non-payments that
affect the profitability and net worth of banks which erodes the value of the asset.
Liquidity and profitability of the banks is affected by high level of NPAs which
additional affects the quality and survival of banks. Serious problem has been
faced by banking sector of India due to high and large NPAs. Profitability of any
bank is directly impact by NPAs. Profit and shareholders value is reduced because
NPAs involve necessary provision. Whole Indian economy is affected by the
problem of NPAs. NPAs are the reflection of health and trade of Indian banking
sector. Non performing assets are one of the major concerns for banks in India.
NPAs reveal the performance of banks. It affects the liquidity and profitability of
banks. Growing non performing assets is a recurrent problem in the Indian banking

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 sector. The NPAs growth has a direct impact on profitability of banks. It involves
the necessity of provisions, which reduces the overall profits and shareholders‟
value. The problem of NPAs is not only affecting the banks but also the whole
economy. In this article, a comparative study has been made between NPA of
public sector banks and private sector banks in India for the past 5 years. The
factors contributing to NPAs, reasons for high NPAs and their impact on Indian
banking operations, the trend and magnitude of NPAs in Indian banks. The
recovery of NPAs in both public and private sector banks has been analysed.

An example of NPA:

Suppose the State Bank of India (SBI) gives a loan of Rs. 10 crores to a company
(Eg: Kingfisher Airlines). Consider that they agreed upon for an interest rate of say
10% per annum. Now suppose that initially everything was good and the market
forces were working in support to the airline industry, therefore, Kingfisher was
able to service the interest amount. Later, due to administrative, technical or
corporate reasons suppose the company is not able to pay the interest rates for 90
days. In that case, a loan given to the Kingfisher Airlines is a good case for the
consideration as NPA.

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 C. BRIEF REVIEW OF LITERATURE
Many published articles are available in the area of non-performing assets and a
large number of researchers have studied the issue of NPA in banking industry.
A review of the relevant literature has been described as under:

AUTHOR POINT OF VEIW

in her study. A study on causes and remedies for Non-
H. S. performing assets in Indian public sector banks with special
reference to agricultural development branch, State Bank of
(2016) Mysore has studied that bankers can avoid sanctioning loans
to the non-credit worthy borrowers by adopting certain
measures. There should be careful appraisal of the project
which involves checking the economic viability of the
project. A banker must consider the return on investment on
a proposed project. If the calculated return is sufficiently
higher than the credit amount, he can sanction the loan.
Secondly, he can constantly monitor the borrower in order
to ensure that the amount sanctioned is utilized properly for
the purpose to which it has been sanctioned. This involves
the post sanction inspection by the banker.

in his study on a comparative study of NPA of old private

sector banks and foreign banks hassaid that non-performing
Kumar asset (NPAs) have become a nuisance and headache for the
Indian banking sector for the past several years. One of the
(2014) major issued challenging the performance of commercial
banks in the late 90s adversely affecting was the
accumulation of huge non-performing Assets (NPAs). The
quality of loan portfolio is very crucial for the health and
existence of the banks. High level of (NPAs) has many
implications on profitability, productivity, liquidity,
solvency, capital adequacy and image of the bank.

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 in a study on management of Non-performing Assets in
priority sector reference to Indian bank and Public Sector
Selvarajan and
vadivalagan Banks (PSBs) their research paper has studied that the
growth of Indian Bank's lending to priority sector is more
(2013) than that of the Public Sector Banks as a whole. Indian
Bank has slippages in controlling of NPAs in the early
years of the decade. Therefore, the management of banks
must may special attention towards the NPA management
and take appropriate steps to arrest the creation of new
NPAs, besides making recoveries in the existing NPAs.
Timely action is essential to ensure future growth of the
Bank.
in her research titled”COMPARATIVE ANALYSIS
OF NON PERFORMING ASSETS IN PUBLIC
Mona
SECTOR BANK AND PRIVATE SECTOR
(2020) BANK”
considers data of public sector bank and private sector bankof
last five years. The research paper attempts to evaluate various
ratios of nonperforming assets on the basis of secondary data.
This research paper gives conceptual idea about meaning of
non performingassets; various ratios relatedto non performing
assets and lastly, compare non performing assets in public
sector bank and private sector bank.

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 D. OBJECTIVES OF THE PROJECT

A non performing asset (NPA) is a loan or advance for which the principal or
interest payment remained overdue for a period of 90 days.

Banks are required to classify NPAs further into Substandard, Doubtful and Loss
assets.

 To compare non performing assets in public sector bank and private

sector bank.

 To analyze and compare gross non performing assets in public sector

bank andprivate sector bank.

 To analyze and compare net non performing assets in public sector

bank and private sector bank.

 To analyze relationship between profit and non performing assets

in public sector bank and private sector bank.

 To study the various recovery channels for non-performing assets.

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 E. RESEARCH AND METHODOLOGY OF THE
PROJECT

METHODOLOGY OF THE PROJECT

Non-performing assets of banks are one of the biggest hurdles in the way of socio-
economic development of India.The level of NPAs of the banking system in India
is still too high. It affects the financial standing of the banks so that
it is a heavy burden to the banks. A vigorous effort has to be made by the banks to
strengthen their internal controland risk management systems and to setup early
warning signals for timely detection and action.

i. AREA OF THE PROJECT TOPIC

This study topic are includes the all public sector and private sector banks in
India.

ii. SAMPLE UNIT & SIZE OF THE PROJECT

In this study I used total 5 years financial data from 2019-20 to 2023-24 of
public sector bank and private sector bank.

iii. TYPE OF STUDY IN THIS PROJECT

• The present study of the non-performing assets is confined restricted to the

boundary of public sectorand private sector banks of India.

• To understand the causes and effects of NPA.

• To analyze the past trends of NPA of public and private in different sectors.

• Banks can improve their financial position or can increase their income from
credits with the help of this project.

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 • This can also be applicable to know the reason of increase in NPA.
Limitations of

iv. TOOLS FOR DATA COLLECTION

 PRIMARY DATA

Data observed or collected directly from first-hand experience ,is called primary
data.

 SECONDARY DATA
Published data and the data collected in the past or other parties is called
secondary data.

 SOURCE OF DATA

Secondary data refers to the data which has already been generated and is
available for use. The data about NPAs and its composition, classification of loan
assets, is taken from the official website of Reserve Bank ofIndia and some other
banking sites. In this research study the researcher has to take all public sector
banks and all private sector banks from the authorized published data of RBI for
the study.

In this study I used secondary sources for data collection.

 Online Communities The name of the website are-

 Web Survey Chats www.google.com

 Group Discussion www.investopedia.com

 Online Websites www.academia.edu

 Various Magazines etc… www.economictimes.indiatimes.com

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 v. METHOD OF ANALYSIS

This analysis will help to evaluate the performance of Indian Bank in helping the
agricultural development in India.The following few tables are prepared to study
the role of Indian Bank is helping the agriculture in India.

The Government of India through the instructions of Reserve Bank of India (RBI)
mandates certain type of lending onthe Banks operating in India, irrespective of
their origin. RBI sets targets in terms of percentage (of total money lentby the
Banks) to be lent to certain sectors, which in RBI's perception would not have
access to organized lendingmarket or could not afford to pay the interest at the
commercial rate. This type of lending is called Priority SectorLending. Financing
of Small Scale Industry, Small business, Agricultural Activities, Export activities
and the activitiesnarrated in the previous paragraphs are fall under this category.

The priority sector activities have been given adequate financial assistance through
Banks. Among the 20 point programmes announced by the Prime Minister, Mrs.
Indira Gandhi, poverty alleviation, creation of employment opportunities,
promotion of self employment, protection and promotion of village and cottage
industries, encouraging entrepreneurs and similar socio economic development
programmes were given top priority. Thus various employment generation
activities, Agricultural development activities and activities related to small Scale
industries have been classified under priority sector. In other words, some areas of
fields in a country, depending on its economic condition or government interest are
called Priority Sectors, i.e. industry and agriculture. These may further be sub-
divided. Banks are directed by the central bank of the country that loans must be
given on reduced rates of interest with discounts to promote these fields; such
lending is called Prime Sector Lending. Priority sector was first properly
announced in 1972, after the National Credit Council emphasized that there should
be a larger involvement of the commercial banks in the priority sector. In 1974, the
banks were given a target of 33.33 % as share of the priority sector in the total
bank credit. This was later revised on the recommendation of the Dr. K S
Krishnaswamy committee and raised to 40%. RBI has divided the Priority Sector
into the following categories.

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 F. LIMITATIONS OF THE PROJECT

Since my study is based upon Secondary data, the practical operations as relatedto
NPAs are adopted by the banks are not learned. NPAs are changing with the time.
The study is done in the present environment without foreseeing future
developments. The study is based on secondary data as published in various
publications of RBI and other reports. These data are based on historical
accounting concept, which ignores the impact of inflation.
The study, as limitations, is confined only to the selected and restricted indicators
and the study is confined only for the period of five years.

Other Limitations of the Study are:

 Expensive to make
 Time Consuming
 Lack Of Reliable Documents
 Lack Of Verified Information Sources

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 G. CHAPTER PLANNING

Name of the chapters are given below:

 Chapter-1: INTRODUCTION , Background of the study, Justification of

the study, Brief Review of Literature, Objectives of the Study,
Methodology of the Study, Limitations of the Study, Chapter Planning

 Chapter-2: CONCEPTUAL FRAMEWORK , Concepts/Different

terminologies , National Scenario International Scenario

 Chapter-3: PRESENTATION AND DATA ANALYSIS , Presentation of

Data, Application of Statistical Tool and Interpretation, Findings

 Chapter-4: CONCLUSION AND RECOMMENDATIONS , Conclusion,

Recommendations

 Bibliography /References

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 CHAPTER:- 2

2. CONCEPTUAL FRAMEWORK

In the books of banks, there are different varieties of assets, for instance, cash in
hand, investment, balances with other banks, loans and advances, fixed assets and
other types of assets. The concept of non-performing assets is restricted to
investments and loans and advances. When an asset generates the expected level of
income without disclosing any kind of unusual risk despite the usual commercial
risk, the asset is considered as performing asset.

When the asset ceases to generate revenue in the form of fee, interest or
commission, it is categorized as non-performing asset. A non-performing asset,
NPA, is a type of an advance where the interest installment or repayment of
principal amount remains unpaid for a minimum period of two quarters after
becoming due (Selvarajan & Vadivalagan, 2013).

In other words, non-performing assets are called as non-performing loans for the
banks

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 A. CONCEPTS / DIFFERENT TERMINOLOGIES
OF THIS PROJECT

 DEFINITION OF NON PERFORMING ASSET (NPA)

A non performing asset (NPA) is a loan or advance for which the principal or
interest payment remained overdue for a period of 90 days.

 TYPES OF NON PERFORMING ASSET (NPA)

Although the most common nonperforming assets are term loans, there are other
forms of nonperforming assets as well.

 Overdraft and cash credit (OD/CC) accounts left out-of-order for more than 90
days

 Agricultural advances whose interest or principal installment payments

remain overdue for two crop/harvest seasons for short duration crops or
overdue one crop season for long duration crops

 Expected payment on any other type of account is overdue for more than 90
days

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 CAUSES & IMPACT OF NON PERFORMING ASSETS

 CAUSES OF NPA

 Economic downturns

 Borrower default

 Inadequate credit appraisal

Economic downturns
Economic slowdowns, recession, and slowdown in industrial growth lead to a
decrease in demand for goods and services. This, in turn, affects the cash flows of
companies, and they may default on their loans.

Borrower default
Borrowers may default on their loans due to various reasons such as financial
difficulties, fraud, or mismanagement. This leads to NPAs.

Inadequate credit appraisal

Sometimes, banks and financial institutions do not carry out proper credit appraisal
while sanctioning loans. This may lead to the borrower defaulting on the loan, and
it becoming an NPA

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  IMPACT OF NPA

 Banks do not have sufficient funds for other development projects,

thus impacting the economy.
 The curb in further investments may lead to the rise of unemployment.

 Banks are forced to increase interest rates to maintain a profit margin.

 IMPACT OF NPA ON BORROWERS

 CIBIL Score: The NPA impacts the borrower’s creditworthiness,

thus hurting their CIBIL score.
 Brand Image: An NPA impacts the goodwill of the borrower.
 Future Funding Issues: Banks will be apprehensive about
sanctioning a loan to a borrower whose account is an NPA.
 Impact on other Group Entities: An NPA doesn’t only impact the
borrower but also the other group entities.

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 B. NATIONAL SCENARIO OF THE PROJECT

An asset in any firm refers to its resources that hold a certain economic value, and
that economic value can provide future benefit to the firm. Thus, according to RBI
(Reserve Bank of India), for any asset on which the interest remains unpayable for
a period of 90 days, the asset becomes non-performing. These non-performing
assets decrease the profitability of banks in the country, as the bank gains a
negative image and the account holders lose their trust in them. Talking globally,
India ranks 5th in dealing with the NPAs. According to the surveys, the gross
NPAs of the banking sector on June 30, 2018, were 11.52%, whereas, on March
31, 2018, the gross NPA was 11.68%. The NPAs on public sector banks in 2019
were approximately 7.3 trillion INR, whereas, in 2021, it is approximately 6
trillion INR. Let’s study the causes of the rise in NPA, its impacts on banks.

It greatly reduces the profitability of banks, and can also cause the collapse of the
banking sector. Talking globally, India ranks 5th in dealing with the NPAs. The
NPAs on public sector banks in 2019 were approximately 7.3 trillion INR whereas,
in 2021, it is approximately 6 trillion INR. There are several measures, such as
making the senior executive accountable, proper governance, strict laws by the
government etc., that can be implemented to eradicate the problem of NPA
completely from the Indian banking sectors.

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 i. CAUSES OF RISING THE NPAs IN INDIAN
BANKS

The major causes that give rise to NPAs in the banking sector are as
follows:

 The economy of India was blooming in the early 2000s, due to which the banks
provided a considerable amount of loans to businessmen and companies.
However, these companies were not able to carry out their functions and were
not able to pay their debts too. This led to the rising costs and the recession of
2008.

 The relaxed lending norms to the corporate houses contribute greatly to the
increase of NPAs in the banking sector. The banks provide unsecured loans
without proper analysis, which greatly contributes to the increase of NPA.

 There were bans on mining projects, which greatly affected the industries such
as the iron and steel sector. Their operating cost was higher than their income,
thus, they were unable to pay back their loans to the banks. This mainly affects
the public sector banks of India.

 The priority sector lending contributes to the increment of NPA by giving loans
for agriculture, education, MSMEs and housing. The education loans alone
contribute about 20% of the NPAs of the SBI.

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 ii. STRATEGIES TO SOLVE THE PROBLEM OF
NPAs IN BANKS

Several measures or strategies can be taken to solve the problem of NPA in

banks and to increase the profitability of banks, some of which are as follows:

 It is necessary to make senior executives of the company accountable for the

lapses, instead of blaming the junior executives.

 There is a certain need for the betterment of corporate governance over the
banks.

 is a certain need for the betterment of corporate governance over the banks.

 The government should give the banks more authority to eradicate the
problem of high NPAs.

 The Effective Management Information System (MIS) is a must to

implement for maintaining effective credit risk management.

 To check the stressed assets, there should be the setting up of reconstruction

companies.

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 C. INTERNATIONAL SCENARIO OF THE
PROJECT

The non-performing asset (NPA) issue facing banks has dominated

headlines for several months now and the fact that we are still unsure of
whether or not all have been recognised does cause some discomfort. In
this context it is compelling to see how the Indian banking system stands
on a global yardstick.

This is important because NPAs have resulted due to several judgment calls made
in the past, which in hindsight were incorrect. Lending operations in the banking
system are linked with expectations of how the economy will behave. If the
economy is growing at a fast pace, it is assumed that the same will prevail in
future. The problem hence, is that there always seem to be progressive
expectations when the economy does well. This is where judgement gets blurred
and errors get into the system as credit evaluation goes awry.

In recent times there has been extensive discussion on the accu- mulation of
“huge” non-performing assets (NPAs) on the balance sheets of the Indian banks,
more specifically, the public sector banks (PSBs). PSBs figure prominently in
the debate not only because they dominate the banking industry, but also since
they have much larger NPAs compared with the private and foreign banks
operating in our country. This raises a concern in the industry and academia
because it is generally felt that NPAs reduce the profitability of a bank, weaken
its financial health and erode its solvency

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 i. IN THIS ERA OF GLOBALIZATION: NON
PERFORMING ASSETS OF BANKS

In the recent years, the stressed assets problem has come to the forefront with
bank credit and deposit levels on the fall, especially since 2013. It is interesting
to note that since 2000, the share of private sector banks has gone up over time
but the actual number of private sector banks has decreased. It is an indication
of the fact that RBI has been very careful in giving out banking licenses to
private sector entities. Even today, in this era of globalization, public sector
banks in India still accounts for a major share where Government ownership is
51 per cent or even higher. The point is, if there is a banking crisis of some kind
it will eventually manifest itself into a fiscal problem given that the government
bears bulk of the burden in the recapitalization process of the PSU banks in
India. The present government at the center inherited most of the NPAs from its
predecessor but even the present government’s woes

Table 1: Trends in bank’s non-performing loans to total

gross loans (per cent) : India vs. BRICS
Country Name 2019 2020 2021 2022 2019 2020 2021

Brazil 3.11 3.47 3.45 2.86 2.85 3.31 3.92

Russian Federation 8.23 6.59 6.03 6.00 6.73 8.35 9.44

India 2.39 2.67 3.37 4.03 4.35 5.88 9.19

China 1.13 0.96 0.95 1.00 1.25 1.67 1.75

South Asia 14.75 4.70 4.96 5.58 7.78 8.40 9.62

World 3.89 3.71 3.69 4.03 4.07 4.09 3.92

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 ii. PROBLEMS OF NPAs GLOBALIZATION

The NPA list is topped by countries known as PIIGS (Portugal, Italy, Ireland,
Greece and Spain), excluding Spain that is ranked at 7th spot below India and
Russia. India's NPA ratio is 400 points higher than that of Spain's.

At 9.9 per cent ratio, India has been ranked fifth on the list of countries with
highest Non-Performing Assets (NPAs), and is on top spot among the BRICS
nations, a recent report by CARE Ratings revealed. The country is reeling under a
huge NPA burden of over Rs 7.33 lakh crore as of June 2017. To address the crisis,
the government has announced the recapitalisation of these public sector banks by
infusing around Rs 2.11 lakh crore, besides pumping in Rs 1.35 lakh crore through
recapitalisation bonds. The NPA list is topped by countries known as PIIGS
(Portugal, Italy, Ireland, Greece and Spain), excluding Spain that is ranked at 7th
spot below India and Russia. India's NPA ratio is 400 points higher than that of
Spain's.

Greece has the highest NPA of 36.4 in the world. Its economy is in tatters with
around 50 per cent of registered unemployed people without a regular job for over
one and half year. Other countries like Italy (NPAs 16.4 per cent), Portugal (15.5),
Ireland (11.9), Russia (9.7) and Spain (5.3) are also facing huge NPA crisis.
Experts believe the capital infusion in banks needs to be backed by a string of
reforms so that they engage in responsive banking in the future. For banks to be
responsive the government needs to boost bank boards, address NPAs and HR
related issues. "Reform agenda is the highest priority which has to be implemented
along with capitalisation. A whole lot of reforms will come so that genuine
borrowers don't suffer and get hassle-free, need based credit," Financial Services
Secretary Rajiv Kumar said told PTI.

Page 27
 CHAPTER:- 3

3. PRESENTATION AND DATA ANALYSIS

A process of inspecting, cleansing, transforming, and modeling data with the goal
of discovering useful information, informing conclusions, and supporting decision-
making. Data analysis has multiple facets and approaches, encompassing diverse
techniques under a variety of names, and is used in different business, science, and
social science domains. In today's business world, data analysis plays a role in
making decisions more scientific and helping businesses operate more effectively.

Data mining is a particular data analysis technique that focuses on statistical

modeling and knowledge discovery for predictive rather than purely descriptive
purposes, while business intelligence covers data analysis that relies heavily on
aggregation, focusing mainly on business information. In statistical applications,
data analysis can be divided into descriptive statistics, exploratory data
analysis (EDA), and confirmatory data analysis (CDA). EDA focuses on
discovering new features in the data while CDA focuses on confirming or
falsifying existing hypotheses. Predictive analytics focuses on the application of
statistical models for predictive forecasting or classification, while text
analytics applies statistical, linguistic, and structural techniques to extract and
classify information from textual sources, a species of unstructured data. All of the
above are varieties of data analysis. Data integration is a precursor to data
analysis, and data analysis is closely linked to data visualization and data
dissemination.

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 A. DATA ANALYSIS & INTERPRETATION

To analyse the data, first of all we need to study about what data analysis
and interpretation Is. It is the process by which sense and meaning are
made of the data gathered in qualitative research, and by which the
emergent knowledge is applied to clients' problems. This data often takes
the form of records of groupdiscussions and interviews, but is not limited
to this. Through processes of revisiting and immersion in the data, and
through complex activities of structuring, re-framing or otherwise
exploring it, the researcher looks for patterns and insights relevant to the
key research issues and uses these to address the client's brief.

In this chapter some comparative analysis have been done to achieve the
objectives of the study This is accomplished through various ratios analysis
and correlation between net profits and net NPA's.

 COMPARATIVE RATIOS
 Gross NPA’s Ratio (%)
Gross NPA Ratio = Gross NPA‟s / Gross Advances *100

Table:1 (GROSS NPA TO GROSS ADVANCES RATIO)

GROSS NPA TO GROSS ADVANCES RATIO

year public sector bank private sector bank

2018-19 5 2.1
2019-20 9.3 2.8
2020-21 11.7 4.1
2021-22 14.6 4.7
2022-23 11.6 5.3
2023-24 10.25 5.45

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 Figure :1 (GROSS NPA TO GROSS ADVANCES RATIO)

Gross NPA Ratio

16
14
12
10
8
6
4
2
0
2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

public sector bank private sector bank

Interpretation:

This analysis indicates the Gross NPA Ratio of Public Sector Banks and Private Sector
Banks from 2019 till 2024. As we know very well that higher this ratio, more
dangerous position it is for the banks.

From the above chart we can clearly understand that rate of growth of
Gross NPA of Public Sector Banks is increasing since 2019 to 2022 which
is 5% to 14.6% and in Private Sector Banks also it is gradually increasing
since 2019 from 2.1% to 5.45% in 2024.

But we can say that Gross NPA ratio of Public Sector Banks is decreases in
last two years from 14.6% to 11.6% and 10.25% in 2023 and 2024.
whereas in Private Sector Banks it rises from 4.7% to 5.45% only from year
2022 to 2024.

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  Net NPA Ratio (%)
Net NPA Ratio = Net NPA‟s/ Net Advances*100
Table:2 (NET NPA TO NET ADVANCES RATIO)

NET NPA TO NET ADVANCES RATIO

year public sector bank private sector bank

2018-19 2.9 0.9

2019-20 5.7 1.4

2020-21 6.9 2.2

2021-22 8 2.4

2022-23 4.8 2

Figure:2 (NET NPA TO NET ADVANCES RATIO)

Net NPA Ratio

9
8
7
6
5
4
3
2
1
0
2018-19 2019-20 2020-21 2021-22 2022-23

public sector bank private sector bank

Interpretation:

This analysis indicates the Net NPA Ratio of Public Sector Banks and Private
Sector Banks from 2018 till 2023. As we know very well that higher this ratio, more
dangerous position it is for the banks.

Page 31
 From the above chart we can clearly understand that rate of growth of Net
NPAof Public and Private Sector Banks is increasing since 2018 to
2022 which is 2.6% to 8% and 0.7% to 2.4% respectively. But in the year
2023 ratio is decreases in public and private sector banks from 8% to
4.8% and 2.4% to 2%respectively.

But we can say that increase in Net NPA Ratio of Public Sector Banks is
very alarming which has increased by 2.2% whereas in Private Sector
Banks it rises by 1.3% only from year 2018 to 2023.

 Provisions Ratio (%)

Provision Ratio = Provisions/ Gross NPA‟s *100
Table:3 (PROVISION RATIO)
PROVISION RATIO

year public sector bank private sector bank

2018-19 36.23 90.46

2019-20 28.49 76.13

2020-21 24.89 63.96

2021-22 26.92 53.80

2022-23 29.26 53.87

2023-24 29.54 69.26

Page 32
 FIGURE : 3 PROVISION RATIO

Provision Ratio
100

80

60

40

20

0
2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

public sector bank private sector bank

Interpretation:
This analysis indicates the Provision Ratio of Public Sector Banks and
Private Sector Banks from 2019 till 2024. As we know very well that
higher this ratio,more safe position for banks.

From the above chart we can clearly understand that due to increasing rate
of Gross NPA‟s of Public and Private Sector Banks, provisions made by
these banks are decreasing since 2019 to 2021 which is 436.23%
to 24.89% and 90.46% to 63.96% respectively. After that in public
bank Provision ratio is increased but overall it is decreased by 6.69%
and in private sector bank also itsis 21.2%

We can say that if provisions are decreasing and private sector banks are
havingless NPA‟s as compared to Public Sector Banks even then they are
making more provisions to be on the safer side.

Page 33
  Comparison of Gross NPA Ratio and Net NPA of Public Sector Bank

Table :4 (Comparison of Gross NPA Ratio and Net NPA of Public Sector)
5

PUBLIC SECTOR BNANKS

Bank

year gross npa ratio net npa ratio

2018-19 5 2.9

2019-20 9.3 5.7

2020-21 11.7 6.9

2021-22 14.6 8

2022-23 11.6 4.8

Figure:4 (Comparison of Gross NPA Ratio and Net NPA of Public Sector Bank)

Public sector bank

16
14
12
10
8
6
4
2
0
2018-19 2019-20 2020-21 2021-22 2022-23

gross npa ratio net npa ratio

Interpretation:

This analysis indicates the relationship between gross NPA ratio and net NPAratio.
These both are showing increasing trend from 2019 to 2022 in Public Sector Banks
but is declines in last year by 80% and 60% respectively.

Page 34
 Above chart shows that gross NPA‟s are more as compared to net NPA, which
means more provisions are made by public sector banks so as to reduce the risk
of non recovery.

 Comparison of Gross NPA Ratio and Net NPA of Private Sector

Bank
Table: 5 (Comparison of Gross NPA Ratio and Net NPA of Private Sector Bank)

PRIVATE SECTOR BANKS

Year gross npa ratio net npa ratio

2018-19 2.1 0.9

2019-20 2.8 1.4

2020-21 4.1 2.2

2021-22 4.7 2.4

2022-23 5.3 2

Page 35
 Figure:5 Comparison of Gross NPA Ratio and Net NPA of Private Sector Bank

Private sector bank

6
5
4
3
2
1
0
2018-19 2019-20 2020-21 2021-22 2022-23

gross npa ratio net npa ratio

Interpretation:

This analysis indicates the relationship between gross NPA ratio and net NPA
ratio. These both are showing increasing trend from 2019 to 2022 in Private Sector
Banks. But in 2023 net npa ratio is decreased by 0.4 but gross npa ratio is still
increased.

Above chart shows that gross NPA‟s are more as compared to net NPA, which
means more provisions are made by private sector banks so as to reduce the risk of
non recovery.

Page 36
  COMPOSITION OF LOAN ASSET OF BANKS

 Standard Assets Ratio (%)

Standard Assets Ratio = Total Standard assets / Gross NPAs

Table:6 (Standard asset ratio of public sector bank and private sector bank )
STANDARD ASSET RATIO

year public sector bank private sector bank

2018-19 19.17 46.18

2019-20 9.79 34.14

2020-21 7.57 23.26

2021-22 5.86 20.10

2022-23 7.63 17.76

2023-24 8.75 17.34

Figure:6standard asset ratio of public sector bank and private sector bank

standard asset ratio

50

40

30

20

10

0
2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

public sector bank private sector bank

Page 37
 Interpretation:

This analysis indicates the Standard Asset Ratio of Public Sector Banks and
Private Sector Banks from 2019 till 2024. As we know very well that higher this
ratio, more advantageous it is for the banks.

From the above chart we can clearly understand that the Standard Asset Ratio of
Public and Private Sector Banks is decreasing constantly from 2019 to 2024 & has
fallen down to 17.34% from 46.18% for Private Sector Bank & to 8.75% from
19.17% for Public Sector Bank.

So, overall we can determine that Private Sector bank is in beneficial position than
Public Sector Bank.
 Sub-standard Assets Ratio (%)
Substandard Assets Ratio = Total sub–standard assets / Gross NPAs

Table : (7 substandard asset ratio of public sector bank and private sector bank)
SUB STANDARD ASSET RATIO

year public sector bank private sector bank

2018-19 0.38 0.32

2019-20 0.37 0.33

2020-21 0.25 0.33

2021-22 0.24 0.25

2022-23 0.19 0.24

2023-24 0.20 0.29

Page 38
 Figure:7 (Substandard asset ratio of public sector bank and private sector bank )

Sub standard asset ratio

0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

public sector bank private sector bank

Interpretation:

This analysis indicates the Sub-Standard Asset Ratio of Public Sector Banks and
Private Sector Banks from 2019 till 2024. As we know very well that lower this
ratio, more advantageous it is for the banks.

From the above chart we can clearly understand that the Sub-Standard Asset Ratio
of Public and Private Sector Banks is decreasing constantly from 2019 to2024 &
has fallen down to 0.29% from 0.32% for Private Sector Bank & to 0.20% from
0.38% for Public Sector Bank.

So, we can determine that Public Sector bank is in beneficial position than Private
Sector Bank.

Page 39
  Doubtful Assets Ratio (%)
Doubtful Assets Ratio = Total doubtful assets / Gross NPAs

Table:8 (Doubtful asset ratio of public sector bank and private sector bank)
DOUBTFUL ASSET RATIO

year public sector bank private sector bank

2018-19 0.59 0.52

2019-20 0.60 0.55

2020-21 0.72 0.56

2021-22 0.70 0.68

2022-23 0.71 0.69

2023-24 0.63 0.52

Figure:8 (Doubtful asset ratio of public sector bank and private sector bank)

Doubtful asset ratio

0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

public sector bank private sector bank

Interpretation:
This analysis indicates the Doubtful Asset Ratio of Public Sector Banks and
Private Sector Banks from 2019 till 2024. As we know very well that lesser this
ratio, more advantageous it is for the banks.

Page 40
 From the above chart we can clearly understand that the Doubtful Asset Ratio of
Public Sector Banks is increasing slightly and Private Sector Banks is showing
constant trend from 2019 to 2024. Since the ratio for both the banks have a
marginal difference, therefore the only thing which differentiates the banks is that
this ratio for public and Private it is decreasing in 2024. So, Private Sector
Banks gain advantage from this ratio.

 Loss Assets Ratio (%)

Loss Assets Ratio = Total loss assets / Gross NPAs
Table :9 (Loss asset ratio of public sector bank and private sector bank)
LOSS ASSET RATIO

year public sector bank private sector bank

2018-19 0.04 0.15

2019-20 0.03 0.11

2020-21 0.03 0.10

2021-22 0.06 0.04

2022-23 0.10 0.06

2023-24 0.17 0.19

Page 41
 Figure : 9 Loss asset ratio of public sector bank and private sector bank

Loss asset ratio

0.2

0.15

0.1

0.05

0
2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

public sector bank private sector bank

Interpretation:
This analysis indicates the Loss Asset Ratio of Public Sector Banks and Private
Sector Banks from 2019 till 2024. As we know very well that lower this ratio,
more advantageous it is for the banks.

From the above chart we can clearly understand that the Loss Asset Ratio of
Private Sector Banks is decreasing constantly from 2019 to 2022 & has fallen
down to 0.04% from 0.15% for Private Sector Bank but it increased in 2020
by 0.13.

Public Sector Banks is increasing constantly from 2019 to 2024 & has rice up to
0.17% from 0.04% .

Page 42
  IMPACT OF NON-PERFORMING ASSETS ON
PROFITABILITY

 Correlation between Net Profit & Net NPA of Public Sector Bank
 Table : 10 Correlation between Net Profit & Net NPA of Public Sector Bank
Correlations

NET NPA NET PROFIT

Pearson Correlation 1 -.698

NET NPA Sig. (2-tailed) .123

N 5 5

Pearson Correlation -.698 1

NET PRO FIT Sig. (2-tailed) .123

N 5 5

 Correlation between Net Profit & Net NPA of Private Sector Bank
 Table : (11 Correlation between Net Profit & Net NPA of Private Sector Bank)
Correlations

NET PROFIT NET NPA

Pearson Correlation 1 -.407

NET PRO FIT Sig. (2-tailed) .424

N 5 5

Pearson Correlation -.407 1

NET NPA Sig. (2-tailed) .424

N 5 5

Relationship between Net Profit and Net NPA To establish relationship between
Net Profit and Net NPA Pearson‟s Correlation has been used. Pearson‟s
Correlation for Public Sector Banks is -0.698 and for Private Sector Banks is
0.407.
As we can see that correlation for Private Sector Banks is -0.407 and for Public
Sector Bank is -0.698. It means that there is a negative relation between Net Profits
and NPA of Banks. But in public sector banks it stated that strongly negative
relation between net profit and net NPA. It simply means that as NPA increase and
Profit decreases.

Page 43
 B. FINDINGS

The rate of growth of Gross NPA to gross advances ratio of Public Sector Banks
and private sector banks is increasing over the years .

The rate of growth of Net NPA to Net advances ratio of Public and Privat Sector
Banks is increasing over the years.

It states that Private sector banks makes more provisions in gross NPA & gross
advances as compared to Public Sector Banks. But also it is decreased over the
years.

Private Sector bank is in beneficial position than Public Sector Bank in standard
asset ratio.

The sub-standard assets of both the banks are decreasing both the banks are at
same position.

Doubtful assets of Public sector bank and Private Sector Banks are quite same but
private sector banks have more advantageous position than public sector banks.

Loss assets of both banks are showing increasing trend.

There is a Strong Negative relation between NPA & profits of public sector banks
and Negative relation between NPA & profit of private sector banks.

NPAs reduce the earning capacity banks and badly affect the profitability of banks.

Page 44
 CHAPTER:- 4

4. CONCLUSION AND RECOMMENDATIONS

The interpretations given by the researcher of the significance of the findings of a

research project for the client's business, along with recommendations for action.

These recommendations will be based on the research and on any other relevant

information available to the researcher, including their own past experience in a

market or in business.

Conclusions and recommendations usually form an important part of a project

debrief and of any report or documentation, and are a key part of the value offered

to clients by professional market research.

Conclusions should be logical and clearly explained, and should take into account

any limitations of the data or analysis. Recommendations: Recommendations are

specific actions that can be taken based on the findings and conclusions.

Page 45
 A.CONCLUSION

The NPA is one of the biggest problems that the Indian Banks are facing today.If
the proper management of the NPAs is not undertaken it would hamper the
business of the banks. If the concept of NPAs is taken very lightly it would be
dangerous for the Indian banking sector. The NPAs would destroy the current
profit; interest income due to large provisions of the NPAs, and would affect the
smooth functioning of the recycling of the funds. 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 hampers economic
growth.

Although Public Sector Banks have good substandard assets when compared with
Private Sector banks but Private Sector Banks are more efficient than public sector
banks with regard to all the other factors which give them a good upper hand. The
Non-Performing Assets have always created a big problem for the banks in India.
It is just not only problem for the banks but for the economy too. The money
locked up in NPAs has a direct impact on profitability of the bank as Indian banks
are highly dependent on income from interest on funds lent.

This study shows that extent of NPA is comparatively very high in public sectors
banks. Although various steps have been taken by government to reduce the NPAs
like S4A (Scheme for Sustainable Structuring of Stressed Assets) and
Indradhanush Scheme but still a lot needs to be done to curb this problem. The
NPAs level of our banks is still high. It is not at all possible to have zero NPAs.
The bank management should speed up the recovery process. The problem of
recovery is not with small borrowers but with large borrowers and a strict policy
should be followed for solving this problem. The government should also make
more provisions for faster settlement of pending cases and also it should reduce the
mandatory lending to priority sector as this is the major problem creating area. So
the problem of NPA needs lots of serious efforts otherwise NPAs will keep killing
the profitability of banks which is not good for the growing Indian economy at all.

Page 46
 B. RECOMMENDATIONS
The following recommendations are made to make the NPA viable.

• The public sector banks should focus more on recovery of doubtful assets

• Private sector bank should increase their income from sources other than interest
as rise in NPA due to default in interest income may affect the profit drastically.

• All the bank should keep stringent check on advances being made during the
time.

• RBI should revise existing credit appraisal and monitoring systems.

• Bank should improve upon and strengthen their loan recovery methods.

• Good management needed on side of banks to decrease the level of NPA.

• Proper selection of borrowers and follow ups required to get timely payments.

• Advances provided by banks need pre-sanctioning evaluation and post

disbursement so that NPA can decrease.

• Personal visits should be made after sanction and disbursal of credit and further
close monitoring of the operation of account of borrowed units should be done
periodically.

• Credit appraisal and post loan monitoring are crucial steps which need to be
concentrated by all the banks.

• They are must be regular follow-up with the customers and it is duty of banker to
ensure that there is no diversion of funds this process can be taken up at regular
interval.

Page 47
 BIBLIOGRAPHYN AND REFERENCE

WEBSITES
 www.civilsdaily.com
 www.aqr.org.uk
 www.wikipedia.org
 www.google.com
 www.investopedia.com
 www.academia.edu
 www.economictimes.indiatimes.com

BOOKS
 Management of non-performing assets in banks.
 Managing non-performing assets in bank.

E-NEWSPAPER
 The economic times
 The business standard

Page 48