Legal and non legal options for management of npas. Objectives of research a comparative study of performance of public sector bank and private sector bank has been made by keeping in view, the following objectives 1. The npas in indian commercial banks are growing due to external as well as internal factors. Godwaniin partial fulfillment for the award of the degree of bachelor in commerce honours under dr. Figure 1 the figure 1 depicts that in case of public sector banks declining trend in gross npa was witnessed from year 20062010, whereas in case of private sector banks it declined till year 2008.
Non performing assets meaning examples of npa in banks. Qdo5 navjot singh 11012664 rahul kundliya 11001882 pankaj bisht 11005154. Non performing assets of indian banking system and its impact. In simple terms, an asset is tagged as non performing when it ceases to generate income for the lender. Debarshi, gd and ghosh, s 2011, management of non performing assets in public sector banks evidence from india, international conference on. Relevancy of adr methods a short synopsis by sri r. Abstract the nonperforming assets npas problem is one of the foremost and the most formidable problems that has shaken the entire banking industry like an earthquake. Loans may turn bad due to faulty credit appraisal policies followed by the banks and delays in sanctiondisbursement also make the project unviable. Unscheduled bank in india means a banking company as defined in clause c of section 5 of the banking regulation act, 1949 10 of 1949, which is not a scheduled bank. According to competition and market structure in the zambian banking sector, a report issued by the african development bank afdb in january 20, the increase in the number of banks came with growth in nominal assets, accounting for more than 90% of total financial industry assets, which is ten times higher than other market participants. Biswanath sukul associate professor, department of commerce, dwijendralal college affiliated to university of kalyani, krishnagar, nadia, west bengal, india. In this paper, the npas of public and private sector banks in india has been compared over a period of ten years 2004 to 20. Introduction the banking industry has undergone a sea change after the first phase of economic liberalization in 1991 and hence credit management.
The gross nonperforming assets to total advances ratio from year 20062015 has been presented in the table 1 given below. A strong banking sector is important for flourishing economy. In this paper we do a comparative analysis of the two banking crisis episodesthe one in. The primary data in the form of the perception of officials on management of non performing asset is measured with the help of pre structured questionnaire limitations of the study 1. Banks need to bring down fresh additions to npas to improve the quality of their asset portfolio. Assets which has remained npa for a period less than or equal to 12 months. Determinants of nonperforming assets of commercial banks. The non performing assets npa is an important prudential indicator to assess the financial health of the banking sector. Unscheduled bank in india means a banking company as defined in clause c of section 5 of the banking regulation act, 1949 10 of 1949, which is not a. An asset which ceases to generate income for the bank is called nonperforming asset. A study on non performing assets of public and private. Legal process is tardy and no tangible result is achieved in time. For the most part this has been on account of non performing asset npa related worries which have so far been brushed under the carpet. Of economics, dav college, amritsar143001 punjab, india.
Both the public sector and private sector banks in india are suffering from this problem. It has been observed that the percentage of net npas to net. Non performing asset pdf download npa short note pdf download. A study of nonperforming assets and its impact on banking. Nonperforming assets of public sector banks to be examined by parliamentary panel as per the government, the main reasons for rise in npas are sluggishness in the domestic growth in the recent past, slow recovery in the global economy and continuing uncertainty in global markets. While the primary function of banks is to lend funds as loans to. The level of npas is one of the drivers of financial stability and growth of the banking sector. Rising factors of non performing assets in banking sector. Once the banking sector fails it always has negative effect on the other sectors. A high rate of inflation dilutes the quality of assets of the banking sector. The banking sector has been facing severe problems of rising npas. Non performing assets of indian banking system and its.
A study on management of non performing assets in priority. Non performing assets npa money or assets provided by banks to companies as loans sometimes remain unpaid by borrowers. Pdf capstone project report on the topic a study of non. Assets which do not create any periodical profits are called non performing assets npas. Management of nonperforming assets in indian public. This paper attempts to first examine the level of npas in the banking sector in india. Substandard assets refer to all those assets loans and advances which remain in the nonperforming category for a period of 12 months. A comparative analysis of selected private sector banks dr. Non performing assets had been the single largest cause of frustration of the banking sector of india. Nonperforming assets in indian banking sector international. Banking project report a study on nonperforming assets of. A study of non performing assets of public sector banks in. This typically happens when principal and interest payments on the loan are overdue by 90 days or more.
During the last five financial years, from april 2011, there was an alarming increase of distressed assets of the indian. Non performing assets have always been one of the major concerns in india. Amongst the various desirable characteristics of a wellfunctioning financial system, the maintenance of a few non performing assets npa is an important one. Pdf the problem of rising nonperforming assets in banking.
This paper focuses upon the implications of npas in the banking sector. A nonperforming asset npa refers to a classification for loans on the books of financial institutions that are in default or are in arrears on scheduled payments of. Management of non performing assets in indian public sector banks with special reference to jharkhand abstract i. Existence of nonperforming asset is an integral part of banking and every bank has some nonperforming assets in its advance portfolio. It is a measure of financial soundness of the banking sector in india because it reflects the quality. Nonperforming assets in indian banks total value of npa. The problem of rising non performing assets in banking. A strong banking sector has always been important factor for economy to flourish. It is also known as non productive assets npas, nonperforming loans and constitute integral part of bank. A major threat of banking sector is prevalence of nonperforming assets. Data has been collected from the annual reports of. Non performing assets of public sector banks in india manish kapoor assistant professor, post graduate deptt. Banking sector plays an important role in the development of an economy.
A major threat to banking sector is prevalence of npas. Issue of npa and its impact on erosion of profit and quality of asset was not seriously considered in indian banking prior to 1991. A study of nonperforming assets and its impact on banking sector. A nonperforming asset npa is defined as a credit facility in respect of which the interest andor installment of principal has remained past due for a specified period of time. Finally, loss assets refer to the class of bank assets which cannot be recovered at all. She pointed out that the targetoriented approach, which results in. Impact of nonperforming assets on return on assets of public and private sector banks in india d jayakkodi and dr. Kaur and singh 2011 in their study, nonperforming assets of public and private sector banks a comparative study studied that npas are considered as an important parameter to judge the performance and financial health of banks. Indian banking industry is seriously affected by nonperforming assets.
In the case of the public sector banks, which dominate the banking sector with a share of 70% of business, the gross npa as percent of total assets is 14. Rbi has defined npa as a credit facility in respect of which the interest and or instalment of. An econometric study, middle eastern finance and economics, issue 7 2010. Non performing assets is the amount which is not received by the bank in return of loans disbursed. In the best interest of our readers, we have come up with a comprehensive post on npas, in which analyze the entire issue in detail. Non performing assets npa in public private sector banks. Nonperforming assets had been the single largest cause of frustration of the banking sector of india.
Pdf nonperforming assets of public and private sector. Indian banking sector went through significant changes since the introduction of financial sector reforms in 1991, when it was found that the banks were stressed with high amount of nonperforming assets npa. The level of nonperforming assets npas best indicates the. Reform in the banking industry in india is not anything new. The banking sector has been facing the serious problems of the rising npas. Kaminirai2012, in her study on performance of npas in indian commercial banks has examined the main reasons for increasing npas in banks in india. Apr, 2015 public sector banks psbs in india have performed rather poorly over the past 34 years. Non performing assets and profitability of scheduled. Over the past two decades, there have been two such episodes when the banking sector was severely impaired by balance sheet problems. Nonperforming assets a study with reference to public. Dash, mk and kabra, g 2010, the determinants of non performing assets in indian commercial bank. In most of the cases debt has been classified as nonperforming assets where the loan payments have been outstanding for more than 90 days.
Doubtful assets are the bank assets which remain in the nonperforming category for a period exceeding 12 months. Indian banking industry is seriously affected by non performing assets. In india, the time frame given for classifying the asset as npa is 180 days as compared to 45 days. Request pdf nonperforming assets a study with reference to public sector banks in the liberalized economy, banking and financial sector get high priority. The primary data in the form of the perception of officials on management of nonperforming asset is measured with the help of pre structured questionnaire limitations of the study 1. Nonperforming assets and public sector banks in india. Effect of non performing assets on the profitability of. The amount of non performing assets affects not only the banking industry but the total financial system and there by the economy of the country. Dash, mk and kabra, g 2010, the determinants of nonperforming assets in indian commercial bank. For private sector banks, yes bank is the best performer, followed by hdfc, indusind, and axis.
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. The gross non performing assets and net non performing assets of twenty four public sector banks of india are considered for the last 5 years i. Thus a selective study has been done on public sector banks in india to evaluate the effect of non. One of the major challenges the banking industry is facing is mounting non performing assets npas.
Amongst the various desirable characteristics of a wellfunctioning financial system, the maintenance of a. The problem of rising nonperforming assets in banking sector in india. Nonperforming assets have always been one of the major concerns in india. Assets which do not create any periodical profits are called nonperforming assetsnpas. The npas is an important prudential indicator to assess the financial health of the banking sector.
Gnpa and nnpa position of public sector banks the banks are numbered alphabetically in table 1 and the averages of gnpa and nnpa with respect to. A non performing loan, or npl, is one that is in or close to default. The banking sector is the backbone of the indian economy. Green banking pdf this allows banks to split the stressed account into two heads a sustainable portion that the bank deems that the borrower can pay on existing terms and the remaining portion that. The failure of the banking sector may have an adverse impact on other sector. An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank and is then termed as non performing asset npa. The level of the npa indicates the efficiency of bankers credit risk management and allocation of the resource. Banking project report a study on nonperforming assets ofbank of barodathis finance project report on banking industry in india will be useful to mba students andconcentrates on nonperforming assets, npa of a leading public sector bank in india. The rising of npas are more in public sector banks when it is compared to private sector banks and foreign banks.
A study of non performing assets of public sector banks in india. The nonperforming assets is not a function of loanadvance alone, but is influenced by other bank performance. Banks to witness spike in credit costs, nonperforming assets in 2020 06 apr, 2020, 06. Hence in order to increase the efficiency and profitability of indian banking sector in the country it was important to bring. The author mentions that rbi points to the fact that npas plus stressed assets equal almost 10% of the bank loans. There are many reasons cited for the alarming level of npa in indian banking sector. Thus nonperforming assets are basically nonperforming loans. When the borrower stops paying interest or principal on a loan, the lender will lose money. Economic watch 30 jun 2015 asset quality of most public sector banks in india remains exceptionally weak as of march 2015, gross nonperforming assets gnpas and net nonperforming assets nnpas for the indian banking system as a whole stood at 4. The amounts of gross and net nonperforming asset of the banks both.
Non performing assets of public sector banks in india. Non performing assets engender negative impact on banking stability and growth. P rengarajan abstract the banking industry is one of the basic instruments of economic growth. The gross non performing assets to total advances ratio from year 20062015 has been presented in the table 1 given below. Over the past two decades, there have been two such episodes when the banking. Nov 04, 2012 banking project report a study on nonperforming assets of bank of baroda 1.
Management of nonperforming assets in indian public sector. The nonperforming assets npa is an important prudential indicator to assess the financial health of the banking sector. Npa is a critical indicator of efficiency in credit risk management. The non performing assets is not a function of loanadvance alone, but is influenced by other bank performance. Growing nonperforming assets is a recurrent problem in the indian banking sector. Npas in loan portfolio affect operational efficiency which in turn affects profitability, liquidity and solvency position of banks. The npas are growing due to external as well as internal factors. This paper is an empirical study focuses on causal factors, which are macroeconomic as well as bank specific that influences npa. The current level of npas as disclosed by most public sector banks are far from reality and made possible because of. Factors leading to non performing assets the origin of the problem of rising npas lies in the quality of managing credit risk by the banks. Chapter 5 meaning of non performing assets and provisioning norms. Banking, nonperforming assets, asset reconstruction companies. Banks are required to classify npas further into substandard, doubtful and loss assets. Pdf nonperforming assets in indian banking industry.
At the other end, for public sector banks, united bank of india is the worst performer followed by indian overseas bank, uco bank, and allahabad bank. Nonperforming assets refers to that classification of loans and advances in the books of a lender in which the there is no payment of interest and principal have been received and are past due. Comparative study of performance of public and private sector. Some of the other public sector banks which have significant amount of npas include idbi bank 3. Notes non performing asset pdf download npa short note pdf download latest news scheme for sustainable structuring of stressed assets s4a. Comparative study of performance of public and private. Management of nonperforming assets in indian public sector banks with special reference to jharkhand abstract i.
Banking project report a study on nonperforming assets of bank of baroda 1. The problem of non performing assets in banking sector. Banking project report a study on nonperforming assets. The researcher discusses the vital role of asset reconstruction companies since 2002 in managing npas in the banking sector in the light of the sudden rise in npas in the industry. Weak supply demand scenario, high borrowing or leveraging and intense competition contribute to loan defaults.
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