Term paper

Of
Banking &
insurance
Topic:
Comparative analysis of
NPA
&
its management techniques of a
private sector bank with a public
sector bank.
Submitted to
submitted by
Miss Razia
pallavi joshi
Rol
l no. 12
BBA
(hons) 5th sem.
INTRODUCTION

The accumulation of huge non-performing assets in banks has assumed

great importance. The depth of the problem of bad debts was first realized only in early
1990s. The magnitude of NPAs in banks and financial institutions is over Rs.1 , 50,000
crores.

While gross NPA reflects the quality of the loans made by banks, net NPA
shows the actual burden of banks. Now it is increasingly evident that the major
defaulters are the big borrowers coming from the non-priority sector. The banks and
financial institutions have to take the initiative to reduce NPAs in a time bound strategic
approach.

Public sector banks figure prominently in the debate not only because they
dominate the banking industries, but also since they have much larger NPAs compared
with the private sector banks. This raises a concern in the industry and academia
because it is generally felt that NPAs reduce the profitability of a banks, weaken its
financial health and erode its solvency.

For the recovery of NPAs a broad framework has evolved for the
management of NPAs under which several options are provided for debt recovery and
restructuring. Banks and FIs have the freedom to design and implement their own
policies for recovery and write-off incorporating compromise and negotiated
settlements.

Introduction to NPA

The three letters “NPA” Strike terror in banking sector and business circle today. NPA is
short form of “Non Performing Asset”. The dreaded NPA rule says simply this: when
interest or other due to a bank remains unpaid for more than 90 days, the entire bank
loan automatically turns a non performing asset. The recovery of loan has always been
problem for banks and financial institution. To come out of these first we need to think is
it possible to avoid NPA, no can not be then left is to look after the factor responsible for
it and managing those factors.

Definitions:

An asset, including a leased asset, becomes non-performing when it ceases to

generate income for the bank.

A ‘non-performing asset’ (NPA) was defined as a credit facility in respect of which the
interest and/ or instalment of principal has remained ‘past due’ for a specified period of
time.

With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the ‘90 days’ overdue’ norm for
identification of NPAs, from the year ending March 31, 2004. Accordingly, with effect
from March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance
where;

➢ Interest and/ or instalment of principal remain overdue for a period of

more than 90 days in respect of a term loan,
 ➢ The account remains ‘out of order’ for a period of more than 90 days, in
respect of an Overdraft/Cash Credit (OD/CC),

➢ The bill remains overdue for a period of more than 90 days in the case of
bills purchased and discounted,

➢ Interest and/or instalment 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, and

➢ Any amount to be received remains overdue for a period of more than 90

days in respect of other accounts.

As a facilitating measure for smooth transition to 90 days norm, banks have

been advised to move over to charging of interest at monthly rests, by April
1, 2002. However, the date of classification of an advance as NPA should not
be changed on account of charging of interest at monthly rests. Banks
should, therefore, continue to classify an account as NPA only if the interest
charged during any quarter is not serviced fully within 180 days from the end
of the quarter with effect from April 1, 2002 and 90 days from the end of the
quarter with effect from March 31, 2004.

NON PERFORMING ASSETS (NPA)

WHAT IS A NPA (NON PERFORMING ASSETS)?

Action for enforcement of security interest can be initiated only if the secured asset is
classified as Nonperforming asset.

Non performing asset means an asset or account of borrower ,which has been
classified by bank or financial institution as sub –standard , doubtful or loss asset, in
accordance with the direction or guidelines relating to assets classification issued
by RBI .

An amount due under any credit facility is treated as “past due” when it is not been
paid within 30 days from the due date. Due to the improvement in the payment and
settlement system, recovery climate, up gradation of technology in the banking system
etc, it was decided to dispense with “past due “concept, with effect from March 31,
2001. Accordingly as from that date, a Non performing asset shell be an advance where

i. Interest and/or installment of principal remain overdue for a period of more than
180 days in respect of a term loan,

ii. The account remains ‘out of order ‘ for a period of more than 180 days ,in respect
of an overdraft/cash credit (OD/CC)

iii. The bill remains overdue for a period of more than 180 days in case of bill
purchased or discounted.

iv. Interest and/or principal remains overdue for two harvest season but for a
period not exceeding two half years in case of an advance granted for
agricultural purpose ,and

v. Any amount to be received remains overdue for a period of more than 180 days
in respect of other accounts

With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt ’90 days overdue ‘norms for identification
of NPAs ,from the year ending March 31,2004,a non performing asset shell be a
loan or an advance where;

i. Interest and/or installment of principal remain overdue for a period of

more than 90 days in respect of a term loan,

ii. The account remains ‘out of order ‘ for a period of more than 90 days ,in
respect of an overdraft/cash credit (OD/CC)

iii. The bill remains overdue for a period of more than 90 days in case of bill
purchased or discounted.
 iv. Interest and/or principal remains overdue for two harvest season but for
a period not exceeding two half years in case of an advance granted for
agricultural purpose ,and

v. Any amount to be received remains overdue for a period of more than 90

days in respect of other accounts

Out of order

An account should be treated as out of order if the outstanding balance remains

continuously in excess of sanctioned limit /drawing power. in case where the out
standing balance in the principal operating account is less than the sanctioned
amount /drawing power, but there are no credits continuously for six months as on the
date of balance sheet or credit are not enough to cover the interest debited during the
same period ,these account should be treated as ‘out of order’.

Overdue

Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid
on due date fixed by the bank.

Types of NPA

A] Gross NPA
B] Net NPA

A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI
guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans
made by banks. It consists of all the non standard assets like as sub-standard,
doubtful, and loss assets.
It can be calculated with the help of following ratio:

Gross NPAs Ratio  Gross NPAs

Gross Advances

B] Net NPA:
Net NPAs are those type of NPAs in which the bank has deducted the provision
regarding NPAs. Net NPA shows the actual burden of banks. Since in India, bank
balance sheets contain a huge amount of NPAs and the process of recovery and write
off of loans is very time consuming, the provisions the banks have to make against the
NPAs according to the central bank guidelines, are quite significant. That is why the
difference between gross and net NPA is quite high.
It can be calculated by following_

Net NPAs  Gross NPAs – Provisions

Gross Advances - Provisions

Categories of NPAs

Standard Assets:
Standard assets are the ones in which the bank is receiving interest as well as the
principal amount of the loan regularly from the customer. Here it is also very important
that in this case the arrears of interest and the principal amount of loan does not exceed
90 days at the end of financial year. If asset fails to be in category of standard asset that
is amount due more than 90 days then it is NPA and NPAs are further need to classify
in sub categories.
 Banks are required to classify non-performing assets further into the
following three categories based on the period for which the asset has remained non-
performing and the realisability of the dues:

( 1 ) Sub-standard Assets
( 2 ) Doubtful Assets
( 3 ) Loss Assets

( 1 ) Sub-standard Assets:--
With effect from 31 March 2005, a sub standard asset would be one, which has
remained NPA for a period less than or equal to 12 month. The following features are
exhibited by sub standard assets: the current net worth of the borrowers / guarantor or
the current market value of the security charged is not enough to ensure recovery of the
dues to the banks in full; and the asset has well-defined credit weaknesses that
jeopardise the liquidation of the debt and are characterised by the distinct possibility that
the banks will sustain some loss, if deficiencies are not corrected.

( 2 ) Doubtful Assets:--
A loan classified as doubtful has all the weaknesses inherent in assets that were
classified as sub-standard, with the added characteristic that the weaknesses make
collection or liquidation in full, – on the basis of currently known facts, conditions and
values – highly questionable and improbable.

With effect from March 31, 2005, an asset would be classified as doubtful if it remained
in the sub-standard category for 12 months.

( 3 ) Loss Assets:--
A loss asset is one which considered uncollectible and of such little value that its
continuance as a bankable asset is not warranted- although there may be some salvage
or recovery value. Also, these assets would have been identified as ‘loss assets’ by the
bank or internal or external auditors or the RBI inspection but the amount would not
have been written-off wholly.
 Impact of NPA

 Profitability:-
NPA means booking of money in terms of bad asset, which
occurred due to wrong choice of client. Because of the money getting blocked
the prodigality of bank decreases not only by the amount of NPA but NPA lead to
opportunity cost also as that much of profit invested in some return earning
project/asset. So NPA doesn’t affect current profit but also future stream of profit,
which may lead to loss of some long-term beneficial opportunity. Another impact
of reduction in profitability is low ROI (return on investment), which adversely
affect current earning of bank.

 Liquidity:-
Money is getting blocked, decreased profit lead to lack of enough cash at hand which
lead to borrowing money for shot\rtes period of time which lead to additional cost to the
company. Difficulty in operating the functions of bank is another cause of NPA due to
lack of money. Routine payments and dues.

 Involvement of management:-
Time and efforts of management is another indirect cost which bank has to bear due to
NPA. Time and efforts of management in handling and managing NPA would have
diverted to some fruitful activities, which would have given good returns. Now day’s
banks have special employees to deal and handle NPAs, which is additional cost to the
bank.

 Credit loss:-
Bank is facing problem of NPA then it adversely affect the value of bank in terms of
market credit. It will lose it’s goodwill and brand image and credit which have negative
impact to the people who are putting their money in the banks .
REASONS FOR NPA:

Reasons can be divided in to two broad categories:-

A] Internal Factor
B] External Factor

[A] Internal Factors:-

Internal Factors are those, which are internal to the bank and are controllable by banks.

• Poor lending decision:

• Non-Compliance to lending norms:

• Lack of post credit supervision:

• Failure to appreciate good payers:

• Excessive overdraft lending:

• Non – Transparent accounting policy:

[B] External Factors:-

External factors are those, which are external to banks they are not controllable by
banks.
 • Socio political pressure:

• Chang in industry environment:

• Endangers macroeconomic disturbances:

• Natural calamities

• Industrial sickness

• Diversion of funds and willful defaults

• Time/ cost overrun in project implementation

• Labor problems of borrowed firm

• Business failure

• Inefficient management

• Obsolete technology

• Product obsolete

Preventive Measurement for NPA

 Early Recognition of the Problem:-

Invariably, by the time banks start their efforts to get involved in a revival process, it’s
too late to retrieve the situation- both in terms of rehabilitation of the project and
recovery of bank’s dues. Identification of weakness in the very beginning that is : When
the account starts showing first signs of weakness regardless of the fact that it may not
have become NPA, is imperative. Assessment of the potential of revival may be done
on the basis of a techno-economic viability study. Restructuring should be attempted
where, after an objective assessment of the promoter’s intention, banks are convinced
of a turnaround within a scheduled timeframe. In respect of totally unviable units as
decided by the bank, it is better to facilitate winding up/ selling of the unit earlier, so as
to recover whatever is possible through legal means before the security position
becomes worse.

 Identifying Borrowers with Genuine Intent:-

Identifying borrowers
with genuine intent from those who are non- serious with no commitment or stake in
revival is a challenge confronting bankers. Here the role of frontline officials at the
branch level is paramount as they are the ones who has intelligent inputs with regard to
promoters’ sincerity, and capability to achieve turnaround. Base don this objective
assessment, banks should decide as quickly as possible whether it would be worthwhile
to commit additional finance.

In this regard banks may consider having “Special Investigation” of all financial
transaction or business transaction, books of account in order to ascertain real factors
that contributed to sickness of the borrower. Banks may have penal of technical experts
with proven expertise and track record of preparing techno-economic study of the
project of the borrowers.

Borrowers having genuine problems due to temporary mismatch in fund flow or

sudden requirement of additional fund may be entertained at branch level, and for this
purpose a special limit to such type of cases should be decided. This will obviate the
need to route the additional funding through the controlling offices in deserving cases,
and help avert many accounts slipping into NPA category.
Timeliness
Timeliness and Adequacy of response:-

Longer the delay in response, grater the injury to the account and the asset. Time is a
crucial element in any restructuring or rehabilitation activity. The response decided on
the basis of techno-economic study and promoter’s commitment, has to be adequate in
terms of extend of additional funding and relaxations etc. under the restructuring
exercise. The package of assistance may be flexible and bank may look at the exit
option.

 Focus on Cash Flows:-

While financing, at the time of restructuring the banks may not be guided by the
conventional fund flow analysis only, which could yield a potentially misleading picture.
Appraisal for fresh credit requirements may be done by analyzing funds flow in
conjunction with the Cash Flow rather than only on the basis of Funds Flow.

 Management Effectiveness:-

The general perception among borrower is that it is lack of finance that leads to
sickness and NPAs. But this may not be the case all the time. Management
effectiveness in tackling adverse business conditions is a very important aspect that
affects a borrowing unit’s fortunes. A bank may commit additional finance to an align
unit only after basic viability of the enterprise also in the context of quality of
management is examined and confirmed. Where the default is due to deeper malady,
viability study or investigative audit should be done – it will be useful to have consultant
appointed as early as possible to examine this aspect. A proper techno- economic
viability study must thus become the basis on which any future action can be
considered.

 Multiple Financing:-
A. During the exercise for assessment of viability and restructuring, a Pragmatic
and unified approach by all the lending banks/ FIs as also sharing of all
relevant information on the borrower would go a long way toward overall success
of rehabilitation exercise, given the probability of success/failure.

B. In some default cases, where the unit is still working, the bank should make sure
that it captures the cash flows (there is a tendency on part of the borrowers to
switch bankers once they default, for fear of getting their cash flows forfeited),
and ensure that such cash flows are used for working capital purposes. Toward
this end, there should be regular flow of information among consortium
members. A bank, which is not part of the consortium, may not be allowed to
offer credit facilities to such defaulting clients. Current account facilities may also
be denied at non-consortium banks to such clients and violation may attract
penal action. The Credit Information Bureau of India Ltd.(CIBIL) may be very
useful for meaningful information exchange on defaulting borrowers once the
setup becomes fully operational.

C. In a forum of lenders, the priority of each lender will be different. While one set of
lenders may be willing to wait for a longer time to recover its dues, another
lender may have a much shorter timeframe in mind. So it is possible that the
letter categories of lenders may be willing to exit, even a t a cost – by a
discounted settlement of the exposure. Therefore, any plan for
restructuring/rehabilitation may take this aspect into account.

D. Corporate Debt Restructuring mechanism has been institutionalized in 2001 to

provide a timely and transparent system for restructuring of the corporate debt of
Rs. 20 crore and above with the banks and FIs on a voluntary basis and outside
the legal framework. Under this system, banks may greatly benefit in terms of
restructuring of large standard accounts (potential NPAs) and viable sub-
standard accounts with consortium/multiple banking arrangements.
 For the purpose of analysis and comparison between private sector and public
sector banks, we take five-five banks in both sectors to compare the non performing
assets of banks. For understanding we further bifurcate the non performing assets
in priority sector and non priority sector, gross NPA and net NPA in percentage as
well as in rupees, deposit – investment – advances. Deposit – Investment –
Advances is the first in the analysis because due to these we can understand the
where the bank stands in the competitive market. As at end of March 2008, in
private sector ICICI Bank is the highest deposit-investment-advances figures in
rupees crore, second is HDFC Bank and KOTAK Bank has least figures.

In public sector banks Punjab National Bank has highest deposit-investment-

advances but when we look at graph first three means Bank of Baroda and Bank of
India are almost the similar in numbers and Dena Bank is stands for last in public sector
bank. When we compare the private sector banks with public sector banks among
these banks, we can understand the more number of people prefer to choose public
sector banks for deposit-investment. But when we compare the private sector bank
ICICI Bank with the public sector banks ICICI Bank is more deposit-investment figures
and first in the all banks.

There are two concepts related to non-performing assets_ gross and net. Gross refers
to all NPAs on a bank’s balance sheet irrespective of the provisions made. It consists of
all the non standard assets, viz. Sub standard, doubtful, and loss assets. A loan asset
is classified as ‘ sub standard” if it remains NPA up to a period of 18 months; “ doubtful”
if it remains NPA for more than 18 months; and loss, without any waiting period,
where the dues are considered not collectible or marginally collectible.

Net NPA is gross NPA less provisions. Since in India, bank balance sheets contains a
huge amount of NPAs and the process of recovery and write off of loans is very time
consuming, the provisions the banks have to make against the NPA according to the
central bank guidelines, are quite significant.
Here, we can see that there is huge difference between gross and net NPA. While
gross NPA reflects the quality of the loans made by banks, net NPA shows the
actual burden of banks. The requirements for provisions are:

 100% for loss assets

 100% of the unsecured portion plus 20-50% of the secured portion, depending
on the period for which the account has remained in the doubtful category
 10% general provision on the outstanding balance under the sub standard
category.

Here, there are gross and net NPA data for 2006-07 and 2007-08 we taken for
comparison among banks. These data are NPA AS PERCENTAGE OF TOTAL
ASSETS. As we discuss earlier that gross NPA reflects the quality of the loans made
by banks. Among all the ten banks Dena Banks has highest gross NPA as a
percentage of total assets in the year 2006-07 and also net NPA. Punjab National Bank
shows vast difference between gross and net NPA. There are almost same figures
between BOI and BOB.

YEAR 2006-07
BANK GROSS NPA NET NPA

BOB 1.46 0.35

BOI 1.48 0.45
DENA 2.37 1.16
PNB 2.09 0.45
UBI 1.82 0.59
 2007-08

BANK GROSS NPA NET NPA

BOB 1.10 0.27

BOI 1.08 0.33
DENA 1.48 0.56
PNB 1.67 0.38
UBI 1.34 0.10

2006-07

BANK GROSS NPA NET NPA

 AXIS 0.57 0.36
HDFC 0.72 0.22
ICICI 1.20 0.58
KOTAK 1.39 1.09
INDUSIND 1.64 1.31

2007-08

BANK GROSS NPA NET NPA

AXIS 0.45 0.23

HDFC 0.68 0.22
ICICI 1.90 0.87
KOTAK 1.55 0.98
INDUSIND 1.69 1.25
  COMPARISON OF GROSS NPA WITH ALL BANKS FOR THE YEAR 2007-08.
The growing NPAs affect the health of banks, profitability and efficiency. In the
long run, it eats up the net worth of the banks. We can say that NPA is not a
healthy sign for financial institutions. Here we take all the ten banks gross NPA
together for better understanding. Average of these ten banks gross NPAs is
1.29 as percentage of total assets. So if we compare in private sector banks
AXIS and HDFC Bank are below average of all banks and in public sector BOB
and BOI. Average of these five private sector banks gross NPA is 1.25 and
average of public sector banks is 1.33. Which is higher in compare of private
sector banks?

GROSS NPA:-

 COMPARISON OF NET NPA WITH ALL BANKS FOR THE YEAR 2007-08.
Average of these ten bank’s net NPA is 0.56. And in the public sector banks all
these five banks are below this. But in private sector banks there are three banks
are above average. The difference between private and public banks average is
also vast. Private sector banks net NPA average is 0.71 and in public sector
banks it is 0.41 as percentage of total assets. As we know that net NPA shows
actual burden of banks. IndusInd bank has highest net NPA figure and HDFC
Bank has lowest in comparison.

NET NPA of banks:-

PRIORITY –NON PRIORITY SECTOR

When we further bifurcate NPA in priority sector and Non priority sector. Agriculture +
small + others are priority sector. In private sector banks ICICI Bank has the highest
NPA in both sectors in compare to other private sector banks. Around 72% of NPA is
with ICICI Bank with Rs.1359 crore in priority sector and around 78% in non priority
sector. We can see that in private sector banks, banks have more NPA in non priority
sector than priority sector.

BANK AGRI SMALL OTHERS PRIORITY NON-

PRIORITY
(1) (2) (3) SECTOR

( 1+2+3 )
AXIS 109.12 14.76 86.71 210.59 275.06
HDFC 36.12 110.56 47.70 194.41 709.23
ICICI 981.85 23.35 354.13 1359.34 6211.12
KOTAK 10.00 33.84 4.04 47.87 405.20
INDUSIND 30.44 3.18 30.02 63.64 328.67
TOTAL 1167.53 185.69 522.60 1875.85 7929.28

BANK PRIORITY SECTOR NPA

(ADVANCED RS.CRORE
)
BOB 5469 350
BOI 3269 325
DENA 1160 106
PNB 3772 443
UBI 1924 197
When we talk about public sector banks they are more in priority sector and they given
advanced to weaker sector or industries. Public sector banks give more loans to
Agriculture , small scale and others units and as a result we see that there are more
number of NPA in public sector banks than in private sector banks. BOB given more
advanced to priority sector in 2007-08 than other four banks and Dena Bank is in least.

But when there are comparison between private bank and public sector bank still ICICI
Bank has more NPA in both priority and non priority sector with the comparison of public
sector banks. Large NPA in ICICI Bank because the strategy of bank that risk-reward
attitude and initiative in each sector. Above we also discuss that ICICI Bank has
highest deposit-investment-advance than other banks.

Now, when we compare the all public sector banks and public sector banks on priority
and non-priority sector than the figures are really shocking. Because in compare of
private sector banks, public sector banks numbers are very large.

PUBLIC SECTOR NEW PRIVATE

2006-07 2007-08 2006-07 2007-08
SECTOR
PRIORITY 22954 25287 1468 2080
PUBLIC 490 299 3 0
NON PRT 15158 14163 4800 8339
TOTAL 38602 39749 6271 10419
Here, there is huge difference between private and public sector banks NPA. There is
increase in new private sector banks NPA of Rs.4148 cr in 2007-08 which is almost
66% rise than previous year. In public sector banks the numbers are not increased like
private sector banks.

Summary
NPAs- NON PERFORMING ASSETS

When an asset ceases to generate income for bank it is called as non performing asset.
Nonperforming asset shell be an advance where

Interest and/or installment of principal remain overdue for a period of more than 180
days in respect of a term loan.

There are many factors for rise in NPAs like willful defaults, natural calamities, industrial
sickness, inappropriate technology, improper swot analysis, managerial deficiencies.

I have done the comparative analysis NPAs of public and private sector banks. So for
this I have taken 5 public sector and 5 private sector banks. For understanding I further
divide the non performing assets in priority sector and non priority sector, gross NPA
and net NPA in percentage as well as in rupees, deposit – investment – advances.
Banks I have taken are axis bank, hdfc bank, icici bank, kotak, indusind. And public
sector banks I have taken are BOB, BOI, DENA, PNB, and UBI.

Deposit – Investment – Advances is the first in the analysis because due to these we
can understand the where the bank stands in the competitive market. As at end of
March 2008, in private sector ICICI Bank is the highest deposit-investment-advances
figures in rupees crore, second is HDFC Bank and KOTAK Bank has least figures.
In public sector banks Punjab National Bank has highest deposit-investment-advances
but when we look at graph first three means Bank of Baroda and Bank of India are
almost the similar in numbers and Dena Bank is stands for last in public sector bank.
When we compare the private sector banks with public sector banks among these
banks, we can understand the more number of people prefer to choose public sector
banks for deposit-investment. But when we compare the private sector bank ICICI Bank
with the public sector banks ICICI Bank is more deposit-investment figures and first in
the all banks.

There are 2 concepts of nonperforming assets

1) Gross 2) net
Gross refers to all NPAs on a bank’s balance sheet irrespective of the provisions
made. It consists of all the non standard assets, viz. Sub standard, doubtful,
and loss assets. A loan asset is classified as ‘ sub standard” if it remains NPA up
to a period of 18 months; “ doubtful” if it remains NPA for more than 18 months;
and loss, without any waiting period, where the dues are considered not
collectible or marginally collectible.

Net NPA is gross NPA less provisions. Since in India, bank balance sheets
contains a huge amount of NPAs and the process of recovery and write off of
loans is very time consuming, the provisions the banks have to make against the
NPA according to the central bank guidelines, are quite significant.

Here, there are gross and net NPA data for 2006-07 and 2007-08 I taken for
comparison among banks. These data are NPA AS PERCENTAGE OF TOTAL
ASSETS. As I discuss earlier that gross NPA reflects the quality of the loans made by
banks. Among all the ten banks Dena Banks has highest gross NPA as a percentage of
total assets in the year 2006-07 and also net NPA. Punjab National Bank shows vast
difference between gross and net NPA. There are almost same figures between BOI
and BOB. COMPARISON OF GROSS NPA WITH ALL BANKS FOR THE YEAR 2007-
08. The growing NPAs affect the health of banks, profitability and efficiency. In the long
run, it eats up the net worth of the banks. We can say that NPA is not a healthy sign for
financial institutions. Here I take all the ten banks gross NPA together for better
understanding. Average of these ten banks gross NPAs is 1.29 as percentage of total
assets. So if we compare in private sector banks AXIS and HDFC Bank are below
average of all banks and in public sector BOB and BOI. Average of these five private
sector banks gross NPA is 1.25 and average of public sector banks is 1.33. This is
higher in comparison of private sector banks. COMPARISON OF NET NPA WITH ALL
BANKS FOR THE YEAR 2007-08. Average of these ten bank’s net NPA is 0.56. And
in the public sector banks all these five banks are below this. But in private sector banks
there are three banks are above average. The difference between private and public
banks average is also vast. Private sector banks net NPA average is 0.71 and in
public sector banks it is 0.41 as percentage of total assets. As we know that net
NPA shows actual burden of banks. IndusInd bank has highest net NPA figure and
HDFC Bank has lowest in comparison. When we further bifurcate NPA in priority sector
and Non priority sector. Agriculture + small + others are priority sector. In private
sector banks ICICI Bank has the highest NPA in both sectors in compare to other
private sector banks. Around 72% of NPA is with ICICI Bank with Rs.1359 crore in
priority sector and around 78% in non priority sector. We can see that in private sector
banks , banks has more NPA in non priority sector than priority sector. When we talk
about public sector banks they are more in priority sector and they given advanced to
weaker sector or industries. Public sector banks give more loans to Agriculture, small
scale and others units and as a result we see that there is more number of NPA in
public sector banks than in private sector banks. BOB given more advanced to priority
sector in 2007-08 than other four banks and Dena Bank is in least.

But when there are comparison between private bank and public sector bank still
ICICI Bank has more NPA in both priority and non priority sector with the
comparison of public sector banks. Large NPA in ICICI Bank because the strategy
of bank that risk-reward attitude and initiative in each sector. Above we also discuss
that ICICI Bank has highest deposit-investment-advance than other banks.
Now, when we compare the all public sector banks and public sector banks on priority
and non-priority sector than the figures are really shocking. Because in compare of
private sector banks, public sector banks numbers are very large.

Here, there are huge differences between private and public sector banks NPA. There
is increase in new private sector banks NPA of Rs.4148 cr in 2007-08 which is almost
66% rise than previous year. In public sector banks the numbers are not increased like
private sector banks.

Bibliography
1) http://en.wikipedia.org/wiki/Non-performing_asset

2) http://www.business-standard.com/india/news/icici-home-finance-npas-rise-35-

times/377397/

3) http://www.blonnet.com/2008/01/27/stories/2008012750930201.htm

4) http://www.capitalmarket.com/BrokerResearch/PDFs/17-300570-050209.pdf

5) http://blogs.siliconindia.com/financeandinvestment/ICICI_Home_Finance_NPAs_ris

e_35_times-bid-yvRwOm6s38495114.html

6) http://www.business-standard.com/india/news/bob-puts-npas-worth-rs-460-

crblock/305918/

7) http://www.thehindubusinessline.com/2009/05/02/stories/2009050250350800.htm

8) http://www.unitedbankofindia.com/sale-of-npas.asp

9) http://www.domain-b.com/companies/companies_i/ifci/20061208_sale.html

10) http://www.financialexpress.com/news/dena-bank-to-cut-npas-to-2/142508/