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³COMPARATIVE ANALYSIS ON

NON PERFORMING ASSETS

OF PRIVATE AND PUBLIC SECTOR BANKS´



INTRODUCTION OF BANKING

The development of banking is an inevitableprecondition for the healthy and rapiddevelopment of the national economic structure.

Banking institutions have contributed much tothe development of the developed countries of the world. Today we cannot imagine thebusiness world without banking institutions.Banking is as important as blood in the humanbody. Due to the development of bankingadvances are increased and business activitiesdeveloping so it is rightly said,



" The development of banking is not only

the root but also the result of thedevelopment of the business world." After

independence, the Indian government also

has taken a series of steps to develop thebanking sector.



Due to considerable efforts of the government,

today we have a number of banks such as

Reserve Bank of India, State Bank of India,

nationalised commercial banks, Industrial Banks

and cooperative banks. Indian Banks contribute

a lot to the development of agriculture, and trade

and industrial sectors. Even today the banking

system of India possess certain limitations, but

one cannot doubt its important role in thedevelopment of the Indian economy



INTRODUCTION OF N.P.AINTRODUCTION OF N.P.A

The accumulation of huge nonThe accumulation of huge non--performingperforming

assets in banks has assumed greatassets in banks has assumed great

importance. The depth of the problem of importance. The depth of the problem of bad debts was first realized only in earlybad debts was first realized only in early

1990s. The magnitude of NPAs in banks1990s. The magnitude of NPAs in banks

and financial institutions is over and financial institutions is over

Rs.1,50,000 crores.Rs.1,50,000 crores.



While gross NPA reflects the quality of the loansWhile gross NPA reflects the quality of the loans

made by banks, net NPA shows the actualmade by banks, net NPA shows the actualburden of banks. Now it is increasingly evidentburden of banks. Now it is increasingly evident

that the major defaulters are the big borrowersthat the major defaulters are the big borrowers

coming from the noncoming from the non--priority sector. The bankspriority sector. The banks

and financial institutions have to take theand financial institutions have to take the

initiative to reduce NPAs in a time boundinitiative to reduce NPAs in a time bound

strategic approach.strategic approach.



INTRODUCTION OF CO-

OPERATIVE BANK Unlike commercial banks which are engaged in

serving the industrial and commercial sectors of the economy, the cooperative banks, on theother hand provide credit and allied facilities to

the rural and agricultural sectors. The dawn of this country saw the evolution cooperativemovement in India. Cooperative societies cameinto being when the Cooperative Societies Act,1904, was enacted. The movement was started

with the aim of providing farmers funds with lowrates of interest so that exploitation by the villagemoneylenders is foiled.



The Act provided for the formation of cooperative creditsocieties and a number of small primary credit societieswere established in various parts of the country. Thesesocieties, however, could not mobilise enough resourcesas compared to loans demanded by its members. Thisled to the enactment of a new act in 1912. TheCooperative Societies Act of 1912 provided for starting

Central Cooperative Banks with headquarters located inurban centers. In 1914, necessary steps were taken bythe then government to strengthen the cooperativemovement .



IMPORTANCE OF STUDY

Bank should ensure that subsequent to sale of

the non performing financial assets to other

banks, they do not have any involvement with

reference to assets sold and do not assumeoperational, legal or other type of risks relating

to the financial assets sold.

Each bank will make its own assessment of the

value offered by the purchasing bank for the

financial asset and decide whether to accept or

reject the offer.



Under no circumstances can a sale to other

banks be made at a contingent price whereby in

the event of shortfall in the realization by thepurchasing banks, the selling banks would have

to bear a part of the shortfall

A non ±performing asset in the books shall be

eligible for sale to other banks only if it has

remained a non-performing asset for at two

years in the books of the selling bank.



OBJECTIVES OF THE STUDY

The basic idea behind undertaking theGrand Project on NPA was to:

To evaluate NPAs (Gross and Net) indifferent banks.

To study the past trends of NPA

To calculate the weighted of NPA in risk

management in Banking To analyze financial performance of banks

at different level of NPA



To evaluate profitability positions of banks

To evaluate NPA level in differenteconomic situation.

To Know the Concept of Non Performing

Asset To Know the Impact of NPAs

To Know the Reasons for NPAs

To learn Preventive Measures



Since the Indian banking sector is so wide

so it was not possible for me to cover allthe banks of the Indian banking sector.

the RBI norms for the classification of

asset/ NPA¶s are available on a pay site &

not publicly available through any source.



EXECUTIVE SUMMARY

The accumulation of huge non-performingasset in banks has assumed greatimportance. The depth of the problem of

bad debts was first realized only in early1990s. The magnitude of NPAs in banksand financial institutions is over Rs.1,50,000 crores.While gross NPArefects the quality of the loans made bybanks, net npa shows the actual burden of the banks.



FINDINGS

Gross NPA ratios i,e urban co-operative bank

has stable 5 to 6 % and prime bank ratio has

increses from the last three years. So quality of

credit portfolio of bank is lower. Net NPA ratio of this bank was higher than prime

bank. It shows that urban co-operative bank

consist of risky asset. It will become dangerous

in nthe long term solvency.



RECOMMENDATION

Bank should check the credibility of farmer

like the proper identification and his/her

reputation in the village.

Banks have to find out the original reasons

should be check by the bank and his/her

wealth also, so that he/she can¶t mislead

the bank.



Sarpanch of the village should also inquire

before the disbursement of the loanamount.

The stocks and receivables are to check

randomly by the bank, so that the bank are

aware of position of the firms.



CONCLUSION

The Indian banking sector is facing a serious

problem of NPA . The extent of NPA is

comparatively higher in public sectors banks. To

improve the efficiency and profitability, the NPAhas to be scheduled. Various steps have been

taken by government to reduce the NPA. It is

highly impossible to have percentage NPA. But

at least Indian banks can try competing withforeign banks to maintain international standard.

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