Ijrcm 1 Vol 2 Issue 9 Art 15

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VOLUME NO.2(2011),ISSUE NO.9(SEPTEMBER) ISSN0976-2183

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No. TITLE & NAME OF THE AUTHOR (S)Page No.

1% WORD OF MOUTH (WOM): THE UNNOTICED TOOL FOR STRENGTHENING THE ADOPTION OF BRANDMUJAHID MOHIUDDIN BABU & MUHAMMAD Z MAMUN

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2% THE IMPACT OF RESOURCES ON ENTRAPRENEURIAL SUCCESS - A CASE STUDY ON COMMERCIAL FAST FOOD SMESANSAR A. RAJPUT, SAIMA SALEEM, ASIF AYUB KIYANI & AHSAN AHMED

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3% DETERMINANTS OF VEGETABLE CHANNEL SELECTION IN RURAL TIGRAY NORTHERN ETHIOPIAABEBE EJIGU ALEMU, BIHON KASSA ABRHA & GEBREMEDHIN YIHDEGO TEKLU

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"% MULTY-TIER VIEW OF EMPLOYEE RETENTION STRATEGIES IN INDIAN AND GLOBAL COMPANIES - A CRITICAL APPRAISALANANTHAN B R & SUDHEENDRA RAO L N

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!% HERBAL RENAISSANCE IN INDIA # THE ROLE OF IS$CON IN ITS SUCCESS (WITH SPECIAL REFERENCE TO MAYAPUR VRINDAVANBANGALORE # DELHI IS$CON CENTRES)

DR. RAJESH KUMAR SHARMA & SANDHYA DIXIT

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%% THE IMPACT OF TELEVISION ADVERTISING ON CHILDREN&S HEALTHDR. N. TAMILCHELVI & D. SURESHKUMAR

2'

7% WOR$-LIFE BALANCE AND TOTAL REWARD OPTIMIATION - STRATEGIC TOOLS TO RETAIN AND MANAGE HUMAN CAPITALSUNITA BHARATWAL, DR. S. K. SHARMA, DR. UPENDER SETHI & DR. ANJU RANI

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'% EMPIRICAL STUDY ON EPATRIATE&S OFFICIAL CULTURAL AND FAMILY PROBLEMS WITH REFERENCE TO BANGALORE INDIASREELEAKHA. P & DR. NATESON. C

3%

*% IMPACT OF +UALITY WOR$ LIFE OF THE HOTEL EMPLOYEES IN CUSTOMER SATISFACTION , A STUDY ON STAR HOTELS IN BANGALOREDR. S. J. MANJUNATH & SHERI KURIAN

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1% CULTURE AND DIVERSITY MANAGEMENT- A PERSPECTIVECYNTHIA MENEZES PRABHU & SRINIVAS P S

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11% A STUDY ON FACTORS INFLUENCING RURAL CONSUMER BUYING BEHAVIOUR TOWARDS PERSONAL CARE PRODUCTS IN COIMBATOREDISTRICT

P. PRIALATHA & DR. K. MALAR MATHI

!2

12% THE DETERMINANTS OF PROFITABILITY: AN EMPIRICAL INVESTIGATION USING INDIAN AUTOMOBILE INDUSTRYDR. A. VIJAYAKUMAR

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13% BAN$ING EFFICIENCY: APPLICATION OF DATA ENVELOPMENT APPROACH (DEA)DR. NAMITA RAJPUT & DR. HARISH HANDA

%!

1"% $NOWLEDGE CENTRIC HUMAN RESOURCE MANAGEMENT PRACTICES - A COMPARATIVE STUDY BETWEEN SBI AND ICICIG. YOGESWARAN & DR. V. M. SELVARAJ

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1!% A COMPARATIVE STUDY OF NON-PERFORMING ASSETS OF PUBLIC AND PRIVATE SECTOR BAN$SDR. HARPREET KAUR & NEERAJ KUMAR SADDY

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1%% STRAIGHTEN OUT RENTAL (AND OTHER RETAIL LEASE) DISPUTES BY CONNOISSEUR FORTITUDEHEMANT CHAUHAN, RACHIT GUPTA & PALKI SETIA

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17% AN ANALYTICAL STUDY OF MANAGERIAL ISSUES OF HANDLOOM INDUSTRY IN JAIPUR DISTRICTRACHANA GOSWAMI & DR. RUBY JAIN

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1'% CORPORATE SOCIAL RESPONSIBILITY AND FUTURE MANAGERS , A PERCEPTION ANALYSIS

DR. PURNA PRABHAKAR NANDAMURI & CH. GOWTHAMI

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1*% CUSTOMER RELATIONSHIP MANAGEMENT: MAHA MANTRA OF SUCCESSDR. RADHA GUPTA

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2% THE PROBLEM OF MAL NUTRITION IN TRIBAL SOCIETY (WITH SPECIAL REFERENCE TO MELGHAT REGION OF AMRAVATI DISTRICT)DR. B. P. ADHAU

1*

21% WOMEN EMPOWERMENT AND SELF HELP GROUPS IN MAYILADUTHURAI BLOC$ NAGAPATTINAM DISTRICT TAMILNADUN. SATHIYABAMA & DR. M. MEEENAKSHI SARATHA

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22% A STUDY TO MEASURE EFFECTIVENESS AND PROFITABILITY OF WOR$ING CAPITAL MANAGEMENT IN PHARMASUTICLE INDUSTRY IN INDIADR. ASHA SHARMA

11'

23% CUSTOMER PERCEPTIONS AND SATISFACTION TOWARDS HOME LOANSRASHMI CHAUDHARY & YASMIN JANJHUA

12"

2"% IMAGES OF WOMAN IN ADVERTISING AND ITS IMPACT ON THE SOCIETYSNIGDA SUKUMAR & DR. S. VENKATESH

12'

2!% EMPLOYEE SATISFACTION- A STUDY OF HCL LIMITED

OMESH CHADHA

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RE+UEST FOR FEEDBAC$ 13%


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CHIEF PATRONCHIEF PATRONCHIEF PATRONCHIEF PATRONPROF. $. $. AGGARWAL

)hancellor" 2in#aya3s 4niversity" Delhi

!ounder 5ice-)hancellor" uru obind Sin#h Indraprastha 4niversity" Delhi

67% Pro 5ice-)hancellor" uru Ja0bheshwar 4niversity" +isar

PATRONPATRONPATRONPATRONSH. RAM BHAJAN AGGARWAL

67% State Minister for +o0e 8 9ouris0" overn0ent of +aryana

5ice-President" Dadri 6ducation Society" )har:hi Dadri

President" )hinar Synte7 2td% ;9e7tile Mills


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DR. $ULBHUSHAN CHANDELReader" +i0achal Pradesh 4niversity" Shi0la

DR. TEJINDER SHARMAReader" =uru:shetra 4niversity" =uru:shetra

DR. SAMBHAVNA!aculty" I%I%9%M%" Delhi

DR. MOHENDER $UMAR GUPTAAssociate Professor" P% J% 2% $% overn0ent )olle#e" !aridabad

DR. SHIVA$UMAR DEENEAsst% Professor" overn0ent !% % )olle#e )hit#uppa" Bidar" =arnata:a

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ASSOCIATE EDITORSASSOCIATE EDITORSASSOCIATE EDITORSASSOCIATE EDITORSPROF. NAWAB ALI $HAN

Depart0ent of )o00erce" Ali#arh Musli0 4niversity" Ali#arh" 4%P%PROF. ABHAY BANSAL

+ead" Depart0ent of Infor0ation 9echnolo#y" A0ity School of 6n#ineerin# 8 9echnolo#y" A0ity 4niversity" $oida

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DR. PARDEEP AHLAWATReader" Institute of Mana#e0ent Studies 8 Research" Maharshi Dayanand 4niversity" Rohta:

S. TABASSUM SULTANAAsst% Professor" Depart0ent of Business Mana#e0ent" Matrusri Institute of P%% Studies" +yderabad

TECHNICAL ADVISORTECHNICAL ADVISORTECHNICAL ADVISORTECHNICAL ADVISORAMITA

!aculty" 6%)%)%" Safidon" Jind

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FINANCIAL ADVISORSFINANCIAL ADVISORSFINANCIAL ADVISORSFINANCIAL ADVISORSDIC$IN GOYAL

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SUPERINTENDENTSUPERINTENDENTSUPERINTENDENTSUPERINTENDENT

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CALL FOR MANUSCRIPTSCALL FOR MANUSCRIPTSCALL FOR MANUSCRIPTSCALL FOR MANUSCRIPTS

>einvite unpublished novel" ori#inal" e0pirical and hi#h ?uality research wor: pertainin# to recent develop0ents 8 practices in

the area of )o0puter" Business" !inance" Mar:etin#" +u0an Resource Mana#e0ent" eneral Mana#e0ent" Ban:in#" Insurance"

)orporate overnance and e0er#in# paradi#0s in allied sub1ects li:e Accountin# 6ducation@ Accountin# Infor0ation Syste0s@

Accountin# 9heory 8 Practice@ Auditin#@ Behavioral Accountin#@ Behavioral 6cono0ics@ )orporate !inance@ )ost Accountin#@

6cono0etrics@ 6cono0ic Develop0ent@ 6cono0ic +istory@ !inancial Institutions 8 Mar:ets@ !inancial Services@ !iscal Policy@

overn0ent 8 $on Profit Accountin#@ Industrial Or#ani*ation@ International 6cono0ics 8 9rade@ International !inance@ Macro

6cono0ics@ Micro 6cono0ics@ Monetary Policy@ Portfolio 8 Security Analysis@ Public Policy 6cono0ics@ Real 6state@ Re#ional

6cono0ics@ 9a7 Accountin#@ Advertisin# 8 Pro0otion Mana#e0ent@ Business 6ducation@ Business Infor0ation Syste0s ;MIS


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A COMPARATIVE STUDY OF NON-PERFORMING ASSETS OF PUBLIC AND PRIVATE SECTOR BAN$S

DR. HARPREET KAUR

ASST. PROFESSOR

DEPARTMENT OF DISTANCE EDUCATION

PUNJABI UNIVERSITY

PATIALA

NEERAJ KUMAR SADDY

ASST. PROFESSOR

S.N. COLLEGE

BANGA

ABSTRACTNon!"#$o#%n' ())"*) (#" on" o$ *+" %(o# -on-"#n) $o# (n/) n In0(. NPA) #"$1"-* *+" !"#$o#%(n-" o$ (n/). A +'+ 1"2"1 o$ NPA) )3''")*) +'+ !#o(1*4 o$

( 1(#'" n3%"# o$ -#"0* 0"$(31*) *+(* ($$"-* *+" !#o$*(1*4 (n0 n"*5o#*+ o$ (n/) (n0 (1)o "#o0") *+" 2(13" o$ *+" ())"*. T+" NPA) '#o5*+ n2o12") *+"

n"-"))*4 o$ !#o2)on), 5+-+ #"03-") *+" o2"#(11 !#o$*) (n0 )+(#"+o10"#)6 2(13". T+" ))3" o$ Non P"#$o#%n' A))"*) +() ""n 0)-3))"0 (* 1"n'*+ $o# $n(n-(1

)4)*"% (11 o2"# *+" In0(. T+" !#o1"% o$ NPA) ) no* on14 ($$"-*n' *+" (n/) 3* (1)o *+" 5+o1" "-ono%4. In $(-* +'+ 1"2"1 o$ NPA) n In0(n (n/) ) no*+n' 3*

( #"$1"-*on o$ *+" )*(*" o$ +"(1*+ o$ *+" n03)*#4 (n0 *#(0". T+" In0(n (n/n' )"-*o# ) $(-n' ( )"#o3) !#o1"% o$ NPA). T+" "7*"n* o$ NPA) ) -o%!(#(*2"14

+'+"# n !31- )"-*o#) (n/). To %!#o2" *+" "$$-"n-4 (n0 !#o$*(1*4, *+" NPA) +(2" *o " )-+"031"0. V(#o3) )*"!) +(2" ""n *(/"n 4 'o2"#n%"n* *o #"03-"

*+" NPA). I* ) +'+14 %!o))1" *o +(2" 8"#o !"#-"n*('" NPA). B3* (* 1"()* In0(n (n/) -(n *#4 -o%!"*n' 5*+ $o#"'n (n/) *o %(n*(n n*"#n(*on(1

)*(n0(#0. T+" !#o1"% o$ 1o))") (n0 1o5"# !#o$*(1*4 o$ NonP"#$o#%n' A))"*) 9NPA): (n0 1(1*4 %)%(*-+ n (n/) (n0 $n(n-(1 )"-*o# 0"!"n0 on +o5

2(#o3) #)/) (#" %(n('"0 n *+"# 3)n")). An (**"%!* ) %(0" n *+" !(!"# *+(* 5+(* ) NPA); T+" $(-*o#) -on*#3*n' *o NPA), *+" %('n*30" o$ NPA),

#"()on) $o# +'+ NPA) (n0 *+"# %!(-* on In0(n (n/n' o!"#(*on). B")0") -(!*(1 *o #)/ 5"'+* ('" ())"*) #(*o o$ P31- (n0 P#2(*" )"-*o# (n/),

%(n('"%"n* o$ -#"0* #)/ (n0 %"()3#") *o -on*#o1 *+" %"n(-" o$ NPA) (#" (1)o 0)-3))"0.

$EYWORDS$PA" Ban:" !inancial Sector%

INTRODUCTIONhe Indian ban:in# sector has played a co00endable role in fuellin# and sustainin# #rowth in the econo0y% 9he ban:in# syste0 in India co0prises

co00ercial and cooperative ban:s" of which the for0er accounts for 0ore than ' per cent of ban:in# syste03s assets% Besides a few forei#n and Indian

private ban:s" the co00ercial ban:s co0prise nationali*ed ban:s ;0a1ority e?uity holdin# is with the overn0enthile #ross $PAs reflects the ?uality of the loans 0ade by ban:s" net $PA shows the actual burden of ban:s% $ow it is increasin#ly evident that the 0a1or

defaulters are the bi# borrowers co0in# fro0 the non-priority sector% 9he ban:s and financial institutions have to ta:e the initiative to reduce $PAs in a ti0e

bound strate#ic approach% Public sector ban:s fi#ure pro0inently in the debate not only because they do0inate the ban:in# industries" but also since they have

0uch lar#er $PAs co0pared with the private sector ban:s% 9his raises a concern in the industry and acade0ia because it is #enerally felt that $PAs reduce the

profitability of ban:s" wea:en its financial health and erode its solvency% !or the recovery of $PAs a broad fra0ewor: has evolved for the 0ana#e0ent of $PAs

under which several options are provided for debt recovery and restructurin#% Ban:s and !Is have the freedo0 to desi#n and i0ple0ent their own policies for

recovery and write-off incorporatin# co0pro0ise and ne#otiated settle0ents%

NON-PERFORMING ASSETS OF PUBLIC AND PRIVATE SECTOR BAN$S9he ?uality of Indian ban:s3 assets is li:ely to deteriorate over the ne7t two years% 9his will be driven by the slowdown in the econo0y" and by the a#in# of loans

0ade in recent years% 9he $PAs are considered as an i0portant para0eter to 1ud#e the perfor0ance and financial health of ban:s% 9he level of $PAs is one of

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the drivers of financial stability and #rowth of the ban:in# sector% 9he !inancial co0panies and institutions are nowadays facin# a 0a1or proble0 of 0ana#in#

the $on Perfor0in# Assets ;$PAs< as these assets are provin# to beco0e a 0a1or setbac: for the #rowth of the econo0y% $PAs in si0ple words 0ay be defined

as the borrower does not pay principal and interest for a period of &G' days% +owever" it is ta:en into consideration now that default status would be #iven to a

borrower if dues are not paid for ' days% If any advance or credit facility #ranted by the ban: to a borrower beco0es non-perfor0in#" then the ban: will have

to treat all the advancescredit facilities #ranted to that borrower as non-perfor0in# without havin# any re#ard to the fact that there 0ay still e7ists certain

advances credit facilities havin# perfor0in# status%

ASSET CLASSIFICATION

CATEGORIES OF NPAS

STANDARD ASSETS

Standard assets are the ones in which the ban: is receivin# interest as well as the principal a0ount of the loan re#ularly fro0 the custo0er% +ere it is also very

i0portant that in this case the arrears of interest and the principal a0ount of loan do not e7ceed ' days at the end of financial year% If asset fails to be in

cate#ory of standard asset that is a0ount due 0ore than ' days then it is $PA and $PAs are further need to classify in sub cate#ories% Ban:s are re?uired to

classify non-perfor0in# assets further into the followin# three cate#ories based on the period for which the asset has re0ained non-perfor0in# and the

reliability of the dues

(1) SUB-STANDARD ASSETS

>ith effect fro0 & March E''." a sub standard asset would be one" which has re0ained $PA for a period less than or e?ual to &E 0onth% 9he followin#

features are e7hibited by sub standard assets the current net worth of the borrowers #uarantor or the current 0ar:et value of the security char#ed is not

enou#h to ensure recovery of the dues to the ban:s in full@ and the asset has well-defined credit wea:nesses that 1eopardi*e the li?uidation of the debt and are

characteri*ed by the distinct possibility that the ban:s will sustain so0e loss" if deficiencies are not corrected%

(2) DOUBTFUL ASSETS

A loan classified as doubtful has all the wea:nesses inherent in assets that were classified as sub-standard" with the added characteristic that the wea:nesses

0a:e collection or li?uidation in full" , on the basis of currently :nown facts" conditions and values , hi#hly ?uestionable and i0probable%

>ith effect fro0 March &" E''." an asset would be classified as doubtful if it re0ained in the sub-standard cate#ory for &E 0onths%

(3) LOSS ASSETS

A loss asset is one which considered uncollectible and of such little value that its continuance as a ban:able asset is not warranted- althou#h there 0ay be so0e

salva#e or recovery value% Also" these assets would have been identified as Closs assets3 by the ban: or internal or e7ternal auditors or the RBI inspection but the

a0ount would not have been written-off wholly%

FACTORS FOR RISE IN NPAS

9he ban:in# sector has been facin# the serious proble0s of the risin# $PAs% But the proble0 of $PAs is 0ore in public sector ban:s when co0pared to private

sector ban:s and forei#n ban:s% 9he $PAs in PSB are #rowin# due to e7ternal as well as internal factors%

ETERNAL FACTORS

- I056655 R559

9he ovt% has set of nu0bers of recovery tribunals" which wor:s for recovery of loans and advances% Due to their ne#li#ence and ineffectiveness in their wor:

the ban: suffers the conse?uence of non-recover" their by reducin# their profitability and li?uidity%

- W==6@= D56/@=

9here are borrowers who are able to pay bac: loans but are intentionally withdrawin# it% 9hese #roups of people should be identified and proper 0easures

should be ta:en in order to #et bac: the 0oney e7tended to the0 as advances and loans%

-N/@9/= C/=/45

9his is the 0easure factor" which is creatin# alar0in# rise in $PAs of the PSBs% every now and then India is hit by 0a1or natural cala0ities thus 0a:in# theborrowers unable to pay bac: there loans% 9hus the ban: has to 0a:e lar#e a0ount of provisions in order to co0pensate those loans" hence end up the fiscal

with a reduced profit%

- I0@9/= S05

I0proper pro1ect handlin# " ineffective 0ana#e0ent " lac: of ade?uate resources " lac: of advance technolo#y " day to day chan#in# #ovt% Policies #ive birth to

industrial sic:ness% +ence the ban:s that finance those industries ulti0ately end up with a low recovery of their loans reducin# their profit and li?uidity%

- L/ 6 D54/0

6ntrepreneurs in India could not foresee their product de0and and starts production which ulti0ately piles up their product thus 0a:in# the0 unable to pay

bac: the 0oney they borrow to operate these activities% 9he ban:s recover the a0ount by sellin# of their assets" which covers a 0ini0u0 label% 9hus the ban:s

record the non recovered part as $PAs and has to 0a:e provision for it%

-C/0ith every new #ovt% ban:in# sector #ets new policies for its operation% 9hus it has to cope with the chan#in# principles and policies for the re#ulation of the

risin# of $PAs%

INTERNAL FACTORS

- D5655 L500< P95

9here are three cardinal principles of ban: lendin# that have been followed by the co00ercial ban:s since lon#%i% Principle of safety

ii% Principle of li?uidity

iii% Principle of profitability

- I0/??9?9/5 T50=


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9he ban:er should follow the principle of diversification of ris: based on the fa0ous 0a7i0 0o no* /""! (11 *+" "'') n on" ()/"*


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involved therein% Redefined ob1ective of 0ana#in# $PAs throu#h profit 0a7i0i*ation approach and ris: 0ana#e0ent approach were su##ested% 9he author

further concluded that the hi#h rise in #ross and net $PAs of the ban:in# sector in the recent past was at an e7ponential rate #ivin# an indication that present

on#oin# recession was ta:in# a heavy toll on corporate credit discipline%

Reddy ;E''< in their research paper" K$PAs 9hreat to !inancial StabilityK" confir0ed that financial stability is an essential prere?uisite for sustainable lon#-ter0

econo0ic #rowth of any country% Ban:in# syste0 bein# the lar#est co0ponent of financial syste0 should ta:e care to i00uni*e itself fro0 the 0acro econo0ic

shoc:s throu#h 0aintainin# opti0al and ?uality asset portfolios to achieve the ob1ective of s0ooth flow of funds into the 0ost econo0ic channels% 9he non-

perfor0in# assets were posin# a serious threat to this ob1ective of the ban:in# syste0% 9he authors concluded that 0acro and 0icro level refor0s and

adherence to cleaner practices on the part of ban:s" re#ulator" borrowers and #overn0ent will enable the syste0 to #et rid of the $PAs overhan# and let

financial syste0 be an essential ad1unct for econo0ic #rowth%

=han and Sin#h ;E''.< in their Report on K6ffectiveness of DR9s in Recovery of Ban: DuesF" have evaluated the perfor0ance of DR9s in recovery of ban: dues

durin# the years &H to E''(% 9hey have hi#hli#hted 0a1or defects in DR9 syste0 and also #ave reco00endations to overco0e the0% 9hey have concluded

that the DR9s were effective in recovery of ban:sN dues to a certain e7tent and would beco0e 0ore effective" provided the #iven su##estions were i0ple0ented

in letter and spirit%

Sa##ar ;E''.< in her research boo: titled" K co00ercial Ban:s in IndiaK" stated that it has been found over the years that the perfor0ance of ban:in# sector has

been a 0i7ed one i%e% stron# in widenin# the business covera#e but wea: in ter0s of sustainability and viability% Overti0e" the viability particularly of a nu0ber

of public sector ban:s has beco0e a 0atter of #reat concern% Accordin# to author" profitability of ban:s is influenced by a co0bination of factors such as ?uality

of asset-liability 0ana#e0ent" productivity levels" operatin# costs" or#anisational culture and 0ost critical issue in present conte7t" i%e%" the non-perfor0in#

assets ;$PAshile the pro#ress on this front is li:ely to continue" sustainin# this #rowth in the co0in# years 0ay re?uire focus on the supply

side , capacity buildin#% A #rowth driver in this phase would involve financin# the e0er#in# S0all 8 Mediu0 6nterprises ;SM6s< sector of the econo0y% As such"

ban:s would have to #ear up for the challen#es of 0ana#in# #rowth and conse?uent ris:s in the SM6 sector financin#% Addressin# this issue and puttin# in place

a suitable ris: 0iti#ation 0echanis0 is #oin# to be a fairly dauntin# challen#e% One way of ensurin# focus would be to free up capital , both financial and hu0an

, and 0a:e the0 available for sustainin# the #rowth in assets and profitability% !ar0in# out the ban:s3 $on- Perfor0in# Assets ;$PAs< portfolio to asset-

recovery co0panies" which speciali*e in this se#0ent of the financial sector" could be an option worth evaluatin#%

=u0ar ;E''.< in his article" $on-Perfor0in# Assets in Indian Ban:sF studied that the Indian ban:in# sector faced a serious proble0 of $PAs% 9he e7tent of $PAs

has co0paratively hi#her in public sectors ban:s% 9o i0prove the efficiency and profitability" the $PAs have to be scheduled% 5arious steps have been ta:en by

#overn0ent to reduce the $PAs% It is hi#hly i0possible to have *ero percenta#e $PAs% But at least Indian ban:s can try co0petin# with forei#n ban:s to 0aintain

international standard%

Bose ;E''.< in his research paper" K S6R!A6SI Act An 6ffective Recovery 9oolK" elaborated while there have been several sche0es in the past to facilitate the

recovery fro0 $PAs" the success of such efforts in ter0s of $PAs reduction has been far fro0 satisfactory% S6R!A6SI Act" it was hoped" would #reatly help ban:s

in their efforts to reduce and recover 0oney fro0 $PAs% $onetheless" the recent develop0ents have also brou#ht out the li0itations of the Act" thereby

creatin# apprehensions a0on#st ban:s and financial institutions% $otwithstandin# this" to ta:e full advanta#e of the Act" the cool causes of $PAs" which were

evident in the syste0" 0ay have to be addressed first% 9he author has 0ade an atte0pt to provide a #li0pse of the S6R!A6SI Act a#ainst this bac:drop%

)hu#h ;E''.hile credit #rowth is needed for survival" it is i0perative to ensure that the credit #rowth does not result in non-

perfor0in# advances later% !or this ban:s have to resort to effective pre-disburse0ent as well as post-disburse0ent 0onitorin#% 9he authors concluded that

ne#li#ence in 0onitorin# a loan was less e7cusable than an error at the appraisal sta#e%

Bhatia ;E''< in his research paper entitled" $on-Perfor0in# Assets of Indian Public" Private and !orei#n Sector Ban:s An 60pirical Assess0entF" e7plores an

e0pirical approach to the analysis of $on-Perfor0in# Assets ;$PAs< of public" private" and forei#n sector ban:s in India% 9he $PAs are considered as an

i0portant para0eter to 1ud#e the perfor0ance and financial health of ban:s% 9he level of $PAs is one of the drivers of financial stability and #rowth of the

ban:in# sector% 9his paper ai0s to find the funda0ental factors which i0pact $PAs of ban:s% A 0odel consistin# of two types of factors" vi*%" 0acroecono0ic

factors and ban:-specific para0eters" is developed and the behavior of $PAs of the three cate#ories of ban:s is observed%

=aruna:ar ;E''G< in his article" Are non - Perfor0in# Assets loo0y or reedy fro0 Indian PerspectiveF has discussed that the econo0ic refor0s initiated by

the then finance 0inister and present pri0e 0inister of India Dr% Man0ohan Sin#h would have been re0ained inco0plete without the overhaul of Indian

ban:in# sector% 9he proble0 of losses and lower profitability of $on-Perfor0in# Assets ;$PAs< and liability 0is0atch in ban:s and financial sector depend on

how various ris:s are 0ana#ed in their business% An atte0pt is 0ade in the paper that what are $PAs 9he factors contributin# to $PAs" the 0a#nitude of $PAs"

reasons for hi#h $PAs and their i0pact on Indian ban:in# operations% Besides capital to ris: wei#hta#e assets ratio of public sector ban:s" 0ana#e0ent of creditris: and 0easures to control the 0enace of $PAs are also discussed% 9he lastin# solution to the proble0 of $PAs can be achieved only with proper credit

assess0ent and ris: 0ana#e0ent 0echanis0% It is better to avoid $PAs at the 0ar:et sta#e of credit consolidation by puttin# in place of ri#orous and

appropriate credit appraisal 0echanis0s%


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Shar0a ;E''< in his research paper entitled" Perfor0ance Analysis of the Indian Ban:in# SectorF" stated that the public sector ban:s have e0er#ed stron#

across all :ey indicators as the #lobal financial tur0oil and slowin# do0estic econo0y put the ban:in# sector on a test% 9he public ban:s have not only reduced

the lendin# rates but have also 0ana#ed to record hi#her avera#e net profit and lower $PAs level than their private sector counterparts% Accordin# to the study

the public sector ban:s ;PSBs< have shown i0pressive perfor0ance across all the si#nificant ban:in# para0eters% >hile they have reduced their pri0e lendin#

rates" by private ban:s" their credit #rowth has far surpassed the latter re#istered by private ban:s% Despite lower lendin# rates" the net interest inco0e #rowth

of the PSBs was 0uch hi#her than the private ban:s which fuelled the botto0 line #rowth of public ban:s% Pro#ressin# upon brin#in# a si#nificant shift in their

conventional i0a#e" the public sector ban:s have considerably i0proved their ?uality of assets% 9he rise in $et $PAs of the private ban:s was far hi#her than the

public sector ban:s%

ANALYSIST/=5 1.1both types of ban:s showed a declinin# trend in #ross and net $PAs over the period of the study but public sector ban:s hi#her ratio as co0pare to

private sector ban:s reason behind this is that private sector ban:s have a secured loan policy as co0pares to public sector ban:s% ross and net $PAs have

increased in absolute ter0s till E''E and started declinin# after that" yet they have declined si#nificantly in relative ter0s in the #iven period% It is observed that

#ross $PAs as absolute and in percenta#e ter0s with #ross advances of PSBs have declined fro0 Rs% G"G( crore ;&%.Q< to Rs% ""3* 995 (E%& Q< in the period

of &(-. to E''G-'" whereas #ross $PAs as percenta#e with #ross advances of Private sector ban:s have declined fro0 Rs% &GH crore ;G%Q< to

Rs%1%*'3995 (3.2Q< durin# the period" of &-G to E''G-'% On the other hand net $PAsof Public sector ban:s in absolute and in percenta#e ter0s have

also co0e down fro0 Rs%&".H crore ;&'%' Q< in &(-. to Rs% E&"' crore ;'%' Q< in E''G-' but co0paratively in private sector ban:s net $PAs as

absolute and in percenta#e ter0s to net advances have also co0e down fro0 Rs% &GH crore ;G%E' Q< in &-G to Rs% (&G crore ;&%.'Q< in E''G-' So" even

after i0ple0entation of prudential nor0s in early nineties and serious concern raised by #ovt% about #rowin# si*e of $PAs" Public Sector Ban:s paid least

attention to all these warnin#s" which subse?uently led to turnin# fresh loans of ban:s into non-perfor0in# cate#ory% So" fallin# ratio of $PAs in ter0s of

advances is not a true indicator of perfor0ance of PSBs in the field of $PAs% In fact" #rowin# si*e of #ross $PAs in absolute for0 has been real cause of worry

+owever@ there is a silver linin#" on account of the steps ta:en by the ban:s under the Securiti*ation Act% 9he #ross as well as net $PAs of Public and Private

sector ban:s have started declinin# after E''E this showed the reverse trend in contrast to the earlier years%

TABLE 1.1 GROSS AND NET NPAS OF PUBLIC AND PRIVATE SECTOR BAN$S

SO4R)6 ;RBI< R6POR9 O$ 9R6$D A$D PROR6SS O! BA$=I$ I$ I$DIA" 5ARIO4S ISS46S%

GROSS NPAS OF PUBLIC AND PRIVATE SECTOR BAN$S

P@= S59 B/0 P9/5 S59 B/0 P@= S59 B/0 P9/5 S59 B/0

/ears G9 NPA (

R. 0 995)

6 G9 NPA

G9 A/05

G9 NPA (

R. 0 995)

6 G9 NPA

G9 A/05

N5 NPA (

R. 0 995)

6 N5 NPA

N5 A/05

N5 NPA (

R. 0 995)

6 N5 NPA

N5 A/05

&. G"G( &%.' $A $A &".H &'%' $A $A

&H (&"HH& &G%'' $A $A &G"EG 'G%' $A $A

& (". &%G( $A $A E'"EG. %&G $A $A

&G (."H. &H%'E &GH G% E&"EE G%&. &GH G%E'

& .&"&' &.%' (H.. &'%(' E("E&& G%& E( G%&'

E''' .E"E(& &(%' (H& G%& EH"&' %(E '& .%(&

E''& .("HE &E%( . G%E E" H%' '' E%E

E''E .H"( &&%& &&HHE %H( E".G .%G' HHH E%(

E'' .("'G %( &&'GE G%' E("GHG (%.' & E%E

E''( .&".(& %G 13'1 .%G &G"GH' %'' (&EG &%E

E''. (H".H .%( '7'2 % &H"G E%'H (E&E &%G.E''H (&" % 7'11 E%H &(".H' &%' && &%'

E'' 3'%2 E%G *2!% E%( &."&(. &%&' ('EG '%

E''G 3*7"* E% 12**7 E% &"GH '%G' .H( &%E'

E'' ""3* E%& 1%*'3 %E E&"' '%' (&G &%.'


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NET NPAS OF PUBLIC AND PRIVATE SECTOR BAN$S

'

."'''

&'"'''

&."'''

E'"'''

E."'''

'"'''

Public Sector Ban:s

Private Sector Ban:s

TABLE 1.2 /0 1.3 shows the distribution of $PAs a0on# the Public and Private sector ban:s in different sectors for the period of &(-. to E''G-'% As far as

the public sector ban:s are concerned" about H'Q of non-perfor0in# assets belon# to the priority sector lendin#% $on-priority sector accounts for %EQ of the

total $PAs in public sector ban:s% In case of private sector ban:s" non priority sector constitutes HG%.Q% It is observed that $PAs of priority sector in public

sector ban:s are Rs% E(&G crore as co0pared to Rs% H(' crore in private sector ban:s% 9he proportion of $on Priority Sector $PAs is hi#h as co0pare to Private

sector ban:s in public sector ban:s in the initial years% But In E'' total $PAs of Private sector ban:s are increased all the sectors in private sector ban:s are

Rs%E%(G crore as co0pare to Public sector ban:s $PAs of Rs% (('(E crore% But co0paratively the proportion of $on Priority Sector $PAs of Private sector

ban:s is very low as co0pare to public sector ban:s% $PAs of Private sector ban:s are Rs% &&E crore ; GQ< as co0pare to public sector ban:s $PAs of Rs%

&E.& crore ;(%Q (.H >>

&G E&&G( @.@ &HE ?.> E&' =>. (.H. >>

& EEH'H @?. &(H . EH'G =?.@ .&&' >>

E''' E&. @@.= &'.. .> EG.E( =?.= .E( >>

E''& E(&.H @=.@ &&& ?. E' =.@ .&( >>

E''E E.& @@.= &&&H .> 'E.& =?.= .H.'H >>

E'' E(G @. &'G . EHG& =>. .EG' >>

E''( EG(' @.= H&' . E.HG =. .'&(G >>

E''. E @. (.' >. EG( =>.> (HH >>

E''H EE( =@. (& >. &GHH( @=. (&G >>

E'' EE.( =.= (' .? &.&.G ?.? GH'E >>

E''G E.EG ?. E >. &(&H ?=. ( >>

E'' E(&G ==. (( . &E.& @?. (('(E >>

Source ;RBI< Report on 9rend and Pro#ress of Ban:in# in India" various issues%


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SECTOR-WISE NPAS OF PUBLIC SECTOR BAN$S

TABLE 1.3: SECTOR-WISE NPAS OF PRIVATE SECTOR BAN$S (A4@0 0 R. C995)P99 S59 P@= S59 N0-P99 S59 T/=

/ear A0ount Per cent A0ount Per cent A0ount Per cent A0ount Per cent

E''& &G. EG%H &E &% ((.E H%. H(&' &''

E''E E.(H E&%G & '% '' % &&HH &''

E'' E((. E'%H . '%G E G%H &&GHH &''

E''( E(GE E(%' . '% H .% &'.E &''

E''. E&GG E(% (E '%. H.H (% G &''

E''H EEG( E%E ( '%& ..(& '%G GE &''

E'' EGG( &%E E% '%' H.E%.& HG%. E%(G &''

E''G (& EH% %'& - .. %H &EH &''

E'' H(' E&%H . %( &&E G%' &HGG &''


SECTOR-WISE NPAS OF PRIVATE SECTOR BAN$S

RECOVERY OF NPAS IN PUBLIC AND PRIVATE SECTOR BAN$SIn view of several options available to ban:s for dealin# with $PAs" ban:s have been able to recover a si#nificant a0ount of $PAs ;9able &%(


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9AB26 &%( R6)O56R/ O! $PAS I$ P4B2I) A$D PRI5A96 S6)9OR BA$=S (A4@0 0 R. C995)


RECOVERY OF NPAS IN PUBLIC AND PRIVATE SECTOR BAN$S

CONCLUSION9he $PAs have always been a bi# worry for the ban:s in India% It is 1ust not a proble0 for the ban:s@ they are bad for the econo0y too% 9he 0oney loc:ed up in

$PAs is not available for productive use and adverse effect on ban:sN profitability is there% 9he e7tent of $PA is co0paratively hi#her in public sectors ban:s% 9o

i0prove the efficiency and profitability" the $PAs have to be scheduled% 5arious steps have been ta:en by #overn0ent to reduce the $PAs% 9his has led to

decline in the level of $PAs of the Indian ban:in# sector% But a lot 0ore needs to be done% 9he $PAs level of our ban:s is still hi#h as co0pared to the

international standards% It is hi#hly i0possible to have *ero percenta#e $PAs% But at least Indian ban:s can try co0petin# with forei#n ban:s to 0aintain

international standard% One cannot i#nore the fact that a part of the reduction in $PAs is due to the writin# off bad loans by the ban:s% 9he Indian ban:s should

ta:e care to ensure that they #ive loans to creditworthy custo0ers as prevention is always better than cure%

REFERENCESBan0ali O%P%";E''&< K2ife 2ine of Ban:in# $ew RBI !or0ula for $PA RecoveryK IBA Bulletin

Bhalla 5% =% ;E''&


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INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE # MANAGEMENT '

REQUEST FOR FEEDBACK

D5/9 R5/59

At the very outset" International Journal of Research in )o00erce and Mana#e0ent ;IJR)M< ac:nowled#es

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I would li:e to re?uest you to supply your critical co00ents and su##estions about the 0aterial published

in this issue as well as on the 1ournal as a whole" on our 6-0ails i%e% 06894;

Ijrcm 1 Vol 2 Issue 9 Art 15

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