NPA Project PPT (Corrected)
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Transcript of NPA Project PPT (Corrected)
A Grand Project onNon Performing Assets Comparative
analysis of Private Sector Bank & Public Sector BankSubmitted to
Gujarat University
Under the guidance ofMs. Rajeswari Parmar Assistant Professor
PARUL INSTITUTE OF BUSINESS ADMINISTRATION
BBA PROGRAMME
PREPARED BY:
1. Juhi Patel2. Mokshesh Chhajed3. Neetu Dalmia4. Pratibha Jain5. Sheetal Sharma6. Vatsal Kothari
MEANING OF NPA
Non Performing Asset means an asset or account of
borrower, which has been classified by a bank or financial
institution as sub-standard, doubtful or loss asset, in
accordance with the directions or guidelines relating to
asset classification issued by RBI.
An amount due under any credit facility is treated as "past
due" when it has not been paid within 90 days from the
due date.
CLASSIFICATION OF NPAA. Standard (Assets): These are loans which do not have any problem are less
risk.B .Substandard (Assets): These are assets which come under the category of NPA
for a period of less than 12 months.C. Doubtful (Assets): These are NPA exceeding 12 months.D. Loss (Assets): Where loss has been identified by the bank or internal or
external auditors or the RBI inspection but the amount has not been written off wholly.
OBJECTIVES OF THE STUDY
To study the datas of NPAs of last three years in public as
well in private sector banks
To identify the factors affecting NPA
To find out the effectiveness of recovery mechanism
adopted by banks for NPA
To offer suggestions based on the study
To find out the profitability of the banks
LITERATURE REVIEW
Nelson M. Waweru: Study that many financial
institutions that collapsed in Kenya Since 1986 due to
non performing loans, this study investigated the
causes of non performing loans, the actions that bank
managers have taken to mitigate that problem and the
level of success of such actions.
CONTD.. Kevin Greenidge, The purpose of this paper is to build a
multivariate model, incorporating macroeconomic and
bank-specific variables, to forecast non-performing loans
in the banking sector of Barbados. On an aggregate level,
our model outperforms a simple random Walk model on
all forecast horizons, while for individual banks; these
forecasts tend to be more accurate for longer prediction
periods only.
RESEARCH METHODOLOGY
1. Primary Data:
The datas collected were analyzed with the help of questionnaire and
these questionnaires are filled by three public banks and three private
banks.
The tables are used to represent the consolidated data. The graphical
representation is also used for better comprehension and presentation.
2. Secondary Data:
We collected secondary data through RBI website.
SAMPLE SIZE
We took the sample of three public banks and three private banks.
The public banks which we selected as sample are as follows:
SBI Bank
Allahabad Bank
Bank of Baroda
The private banks which we selected as sample are as follows:
YES Bank
HDFC Bank
Kotak Mahindra Bank
SAMPLING TECHNIQUE
We have used Convenient sampling from the non
probability sampling method, which is included in the
types of sampling methods.
DATA ANALYSIS
1. Policy Adopted
Private sector Bank Public Sector Bank
66.67
33.33
IRMDRMPORMIT
33.33
66.67
IRMDRMPORMIT
IRMD – Integrated Risk Management Division RMP – Risk Management Policy ORM – Operational Risk Management IT – Information Technology
2. Measurement of NPA
Private Sector Bank Public Sector Bank
66.67
33.33
EARLY STAGEALERT STAGEADVANCE STAGE
33.33
33.33
33.33
EARLY STAGEALERT STAGEADVANCE STAGE
3. Progress in NPA
Private Sector Bank Public Sector Bank
33.33
66.67
POOR SLOW
MODERATE GOOD
33.33
66.67
POORSLOWMODERATEGOOD
4. Quantum of losses
Private Sector Bank Public sector bank
100
LESSTHAN 25%25-50%50%-75%ABOVE-75%
100
LESSTHAN 25%25-50%50%-75%ABOVE-75%
5. Precautions adopted
Private Sector Bank Public Sector bank
33.33
66.67
COLLATERAL GUARANTEE
GUARANTEE AND ANY OTHER SE-CURITY
COLLATERAL SE-CURITY MEASURES
OTHERS
33.33
66.67
COLLATERAL GUARANTEEGUARANTEE AND ANY OTHER SE-CURITYCOLLATERAL SE-CURITY MEASURESOTHERS
HYPOTHESES TESTING
We have used F-test calculation as hypotheses testing for
the calculation of NPA of both sectors.
The datas are of last 3years.
The source from where data has been collected is
www.iba.in
iba (Indian banking association)
Net NPA calculation of public and private sector banks:1. Public sector banks (in crore)
BANK 2011 2012 2013
Allahabad
Bank
736 1092 4172
SBI 12347 15819 21956
BOB 791 1544 4192
Total 13874 18455 30320
2. Private sector banks (in crore)
BANK 2011 2012 2013
HDFC 296 352 469
KOTAK
Mahindra
211 237 311
YES Bank 9 17 7
Total 516 606 787
H0=There is no significance difference in NPA of public and private sector banks.H1=There is significance difference in NPA of public and private sector banks
F-Test Two-Sample for Variances
Public Bank Private Bank
Mean 20883 636.3333333
Variance 72039117 19050.33333
Observations 3 3
Df 2 2
F 3781.51478
P(F<=f) one-tail 0.00026437
F Critical one-tail 19
CONCLUSION
F cal> F tab
3781.51 > 0.00
Here F calculated value is more than the F tabulated value
so here Hypotheses is rejected.
So we can say that there is significant difference in net
NPA of public and private sector banks.
FINDINGS
There is an impact of NPA on the profitability of the bank.
There is a significant difference in the NPA of public
sector and private sector banks.
The main internal factors affecting NPA in private sector
banks are : improper credit appraisal, lack of effective
follow-up , excessive overdraft lending , lack of post
credit supervision.
CONTD..
The main external factors affecting private sector banks
are: natural calamities,industrial sickness, business failure.
The main internal factors affecting NPA in public sector
banks are : Excessive Overdraft Lending, Lack of
Effective Follow-up ,Absence of Security, Obsolete
Technology, Willful Default/Fraud.
CONTD.. The main external factors affecting public sector banks are
: Natural Calamities, Industrial sickness, Business
failure,Labour Problems of Borrowed Firms.
The recovery mechanism adopted by the private sector
banks are as follows : Outsourcing, Recovery Campus,
One-time-settlement Scheme, Self involvement, Corporate
Restructuring.
CONTD.. The recovery mechanism adopted by the public sector
banks are as follows: One-time-settlement Scheme, Self
involvement, Corporate Restructuring, SARFAESI Act.
CONCLUSION
Growing NPAs is one of the biggest problems that the
banks are facing today. If proper management of the NPAs
is not undertaken it would hamper the efficiency of the
banks. If the concept of NPAs is taken very lightly it
would be dangerous for the banking sector. The NPAs
destroy the current profit and interest income and affect
the smooth functioning of the recycling of the funds.
CONTD.. Banks also redistribute losses to other borrowers by
charging higher interest rates. Lower deposit rates and
higher lending rates repress savings and financial markets,
which in turn hampers the economic growth of the
country. Thus, it is highly essential for the banks to focus
their attention on growth of NPAs and take appropriate
measures to regulate their growth.
REFERENCES
1)Retrieved from:
http://rbi.org.in/scripts/AnnualPublications.aspx?
head=Trend and Progress of Banking in India .
2) Retrieved from:
http://rbi.org.in/scripts/AnnualPublications.aspx?
head=Statistical Tables Relating to Banks of India.
3) Retrieved from:
http://rbi.org.in/scripts/NotificationUser.aspx.
CONTD..
4) Retrieved from:
http://en.wikipedia.org/wiki/Banking_in_India
5) Retrieved from:
http://www.ibef.org/industry/Banking.aspx
6) Retrieved from:
http://www.bankingindiaupdate.com/general.html