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INTRODUCTIONAfter liberalization the Indian banking sector developed very appreciate. The RBI also nationalized good amount of commercial banks for proving socio economic services to the people of the nation. The Public Sector Banks have shown very good performance as far as the financial operations are concerned. If we look to the glance of the financial operations, we may find that deposits of public to the Public Sector Banks have increased from 859,461.95crore to 1,079,393.81crore in 2003, the investments of the Public Sector Banks have increased from 349,107.81crore to 545,509.00crore, and however the advances have also been increased to 549,351.16crore from 414,989.36crore in 2003. The total income of the public sector banks have also shown good performance since the last few years and currently it is 128,464.40crore. The Public Sector Banks have also shown comparatively good result. The gross profits of the Public Sector Banks currently 29,715.26crore which has been doubled to the last to last year, and the net profit of the Public Sector Banks is 12,295,47crore. However, the only problem of the Public Sector Banks these days are the increasing level of the non performing assets. The non performing assets of the Public Sector Banks have been increasing regularly year by year. If we glance on the numbers of non performing assets we may come to know that in the year 1997 the NPAs were 47,300crore and reached to 80,246crore in 2002. The only problem that hampers the possible financial performance of the Public Sector Banks is the increasing results of the non performing assets. The non performing assets impacts drastically to the working of the banks. The efficiency of a bank is not always reflected only by the size of its balance sheet but by the level of return on its assets. NPAs do not generate interest income for the banks, but at the same time banks are required to make provisions for such NPAs from their current profits.


NPAs have a deleterious effect on the return on assets in several ways

They erode current profits through provisioning requirements They result in reduced interest income They require higher provisioning requirements affecting profits and accretion to capital funds and capacity to increase good quality risk assets in future, and They limit recycling of funds, set in asset-liability mismatches, etc.

The RBI has also tried to develop many schemes and tools to reduce the non performing assets by introducing internal checks and control scheme, relationship managers as stated by RBI who have complete knowledge of the borrowers, credit rating system, and early warning system and so on. The RBI has also tried to improve the securitization Act and SRFAESI Act and other acts related to the pattern of the borrowings. Though RBI has taken number of measures to reduce the level of the non performing assets the results is not up to the expectations. To improve NPAs each bank should be motivated to introduce their own precautionary steps. Before lending the banks must evaluate the feasible financial and operational prospective results of the borrowing companies. They must evaluate the business of borrowing companies by keeping in considerations the overall impacts of all the factors that influence the business.


RESEARCH OPERATION1. Significance of the studyThe main aim of any person is the utilization money in the best manner since the India is country were more than half of the population has problem of running the family in the most efficient manner. However Indian people faced large number of problem till the development of the full-fledged banking sector. The Indian banking sector came into the developing nature mostly after the 1991 government policy. The banking sector has really helped the Indian people to utilise the single money in the best manner as they want. People now have started investing their money in the banks and banks also provide good returns on the deposited amount. The people now have at the most understood that banks provide them good security to their deposits and so excess amounts are invested in the banks. Thus, banks have helped the people to achieve their socio economic objectives. The banks not only accept the deposits of the people but also provide them credit facility for their development. Indian banking sector has the nation in developing the business and service sectors. But recently the banks are facing the problem of credit risk. It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back the amount drawn to the banks. The amount which is not given back to the banks is known as the non performing assets. Many banks are facing the problem of non performing assets which hampers the business of the banks. Due to NPAs the income of the banks is reduced and the banks have to make the large number of the provisions that would curtail the profit of the banks and due to that the financial performance of the banks would not show good results The main aim behind making this report is to know how Public Sector Banks are operating their business and how NPAs play its role to the operations of the Public Sector Banks. The report NPAs are classified according to the sector, industry, and state wise. The present study also focuses on the existing system in India to solve the problem of NPAs and comparative analysis to understand which bank is playing what role with concerned to NPAs.Thus, the study would help the decision makers to understand the financial performance and growth of Public Sector Banks as compared to the NPAs.


2. Objective of the study Primary objective:The primary objective of the making report is: To know why NPAs are the great challenge to the Public Sector Banks

Secondary objectives:The secondary objectives of preparing this report are: To understand what is Non Performing Assets and what are the underlying reasons for the emergence of the NPAs. To understand the impacts of NPAs on the operations of the Public Sector Banks. To know what steps are being taken by the Indian banking sector to reduce the NPAs? To evaluate the comparative ratios of the Public Sector Banks with concerned to the NPAs.


2. Research methodologyThe research methodology means the way in which we would complete our prospected task. Before undertaking any task it becomes very essential for any one to determine the problem of study. I have adopted the following procedure in completing my report study. 1. Formulating the problem 2. Research design 3. Determining the data sources 4. Analysing the data 5. Interpretation 6. Preparing research report (1) Formulating the problem

I am interested in the banking sector and I want to make my future in the banking sector so decided to make my research study on the banking sector. I analysed first the factors that are important for the banking sector and I came to know that providing credit facility to the borrower is one of the important factors as far as the banking sector is concerned. On the basis of the analysed factor, I felt that the important issue right now as far as the credit facilities are provided by bank is non performing assets. I started knowing about the basics of the NPAs and decided to study on the NPAs. So, I chose the topic Non Performing Assts the great challenge before the Public Sector Banks. (2) Research Design

The research design tells about the mode with which the entire project is prepared. My research design for this study is basically analytical. Because I have utilised the large number of data of the Public Sector Banks.



Determining the data source

The data source can be primary or secondary. The primary data are those data which are used for the first time in the study. However such data take place much time and are also expensive. Whereas the secondary data are those data which are already available in the market. These data are easy to search and are not expensive too.for my study I have utilised totally the secondary data. (4) Analysing the data

The primary data would not be useful until and unless they are well edited and tabulated. When the person receives the primary data many unuseful data would also be there. So, I analysed the data and edited them and turned them in the useful tabulations. So, that can become useful in my report study. (5) Interpretation of the data

With use of analysed data I managed to prepare my project report. But the analyzing of data would not help the study to reach towards its objectives. The interpretation of the data is required so that the others can understand the crux of the study in more simple way without any problem so I have added the chepter of analysis that would explain others to understand my study in simpler way. (6) Project writing

This is the last step in preparing the project report. The objective of the report writing was to report the findings of the study to the concerned authorities.


4. Limitations of the studyThe limitations that I felt in my study are: It was critical for me to gather the financial data of the every bank of the Public Sector Banks so the better evaluations of the performance of the banks are not possible. Since my study is based on the secondary data, the practical operations as related to the NPAs are adopted by the banks are not learned. Since the Indian banking sector is so wide so it was not possible for me to cover all the banks of the Indian banking sector.


INDIAN BANKING SECTORBanking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the gre