Non Performing Assets A Comparative Study of Public and Private Sector Banks

International Journal of Trend in Scientific Research and Development (IJTSRD)
Volume 6 Issue 6, September-October 2022 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470
@ IJTSRD | Unique Paper ID – IJTSRD52050 | Volume – 6 | Issue – 6 | September-October 2022 Page 1282
Non-Performing Assets: A Comparative
Study of Public & Private Sector Banks
K C Manohar Yadav1
, D. Jakir Hussain2
1
Student, 2
Assistant Professor,
1,2
School of Management Studies, JNTU, Anantapur, Andhra Pradesh, India
ABSTRACT
Non-Performing Assets are a burning topic of concern for the private
as well as public-sector banks, as managing and controlling NPA is
very important. The current paper with the help of secondary data,
from RBI website, tried to analyse the 5 years, (2017-2022) net non-
performing asset data of 2 private and 2 public sector banks. KEY
WORDS: Non performing assets, public sector banks, private sector
banks.
How to cite this paper: K C Manohar
Yadav | D. Jakir Hussain "Non-
Performing Assets: A Comparative
Study of Public & Private Sector Banks"
Published in
International Journal
of Trend in
Scientific Research
and Development
(ijtsrd), ISSN: 2456-
6470, Volume-6 |
Issue-6, October
2022, pp.1282-1291, URL:
www.ijtsrd.com/papers/ijtsrd52050.pdf
Copyright © 2022 by author (s) and
International Journal of Trend in
Scientific Research and Development
Journal. This is an
Open Access article
distributed under the
terms of the Creative Commons
Attribution License (CC BY 4.0)
(http://creativecommons.org/licenses/by/4.0)
INTRODUCTION:
The banking sector is a backbone of a nation’s
financial system as it performs multitudinous
functions in terms if maturity, liquidity and risk
management. The financial health of the economy
could be clearly reflected on the kind of banking
system that exists in one nation. Therefore the
banking system in a country plays a pivotal role in the
development of a country. It has immense
significance in the development of all the sectors if
our economy. As India is the world‘s largest
independent democracy and also an emerging
enormous economic giant its needs huge support and
successful banking system which brings magnificent
affluence in all the aspects of the country. From the
past three decades banking system has witnessed an
exceptional transformation which contributed to the
series of achievement to its credit. It is no longer
limited its operations to the urban areas or
metropolitans but also reached to the highly remote
and distant areas of our country which is one of the
reasons for the India‘s growth. But it is important to
note that after the implementation of LPG in India
even though the government has liberated its policies
in order to support the banking sector, the post
economic reforms revealed an terrifying hindrance to
its development which a Non-Performing Asset.
Therefore the concept of NPA as evolved as a
contemporary issue as a contemporary issue in the
banking scenario when the Reserve Bank of India
implemented the prudential norms as per the
recommendation laid down by the Narasimham
committee in the financial year 1992-93.
NON-PERFORMING ASSETS (NPA)
As per the prudential norms stated by RBI‖ An asset
is considered as non-performing when its interest or
instalment of Principal is due for more than 90 days‖.
In simple words as long as the expected income is
realized from the assets, it is treated as performing
asset but when it fails to generate income or deliver
value on due date, it is treated as non-performing
asset. With a view to moving towards International
best practices and to ensure greater transparency, the
IJTSRD52050

International Journal of Trend in Scientific Research and Development @ www.ijtsrd.com eISSN: 2456-6470
―90 Days overdue‖ norm for identification NPAs
had been adopted from the year ending 31 March,
2004. The Non-performing assets are considered to be
an important parameter which can be used to analyse
and judge the financial performance as well as a
financial health of Banks. The increasing trend in
NPA is considered to be the cause of concern to the
entire banking industry. The banks are experiencing
staggered development due to unprecedented growth
in the rate of NPA, this is due to inappropriate credit
appraisal and inefficient recovery mechanism which
was there would be a mismatch in the assets and
liability increase and higher provisioning requirement
on mounting NPAs adversely affect capital adequacy
ratio and banks profitability. The three letters that
creates huge panic and apprehension in the banking
and business sector today i.e., nothing but a Non-
Performing Assets.
A Non-performing Asset is nothing but assets which
would not generate any income to the bank. In other
words 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
Reserve Bank of India.
CLASSIFICAITON OF NON-PERFORMING
ASSET
Assets are classified into four classes - Standard, Sub-
standard, Doubtful, and Loss assets. NPA consist of
assets under three categories: sub-standard, doubtful
and loss. RBI for these classes of assets should evolve
clear, uniform, and consistent definitions. The banks
should classify their assets based on weaknesses and
dependency on collateral securities into four
categories:
1. Standard Assets:
It carries not more than the normal risk attached to the
business and is not an NPA. 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 do 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 90days then it is NPA
and NPAs are further need to classify in sub
categories.
2. Sub-standard Asset:
A sub-standard asset is one which has remained NPA
for a period less than or equal to 12months from
31.3.2005. In such case the current net worth of the
borrower/guarantor or the current market value of the
security charged is not enough to ensure recovery of
the dues to the banks in full. In other words, such an
asset will have well defined credit weaknesses that
jeopardize the liquidation of the debt and are
characterized by the distinct possibility that the banks
will sustain some loss, if deficiencies are not
corrected.
3. Doubtful Assets:
With effect from 31.3.2005, an asset is to be
classified as doubtful, if it has remained NPA for a
period exceeding 12 months. A loan classified as
doubtful has all the weaknesses inherent in assets that
were classified as sub-standard, with the added
characteristics that the weaknesses make collection or
liquidation in full, - on the basis of currently known
facts, conditions and values- highly questionable and
improbable. Under this category there are three
stages: D-I Doubtful up to one year D-II Doubtful for
further two years D-III Doubtful beyond three years.
4. Loss Assets:
An asset identified by the bank or internal/ external
auditors or RBI inspection as loss asset, but the
amount has not yet been written off wholly or partly.
The banking industry has significant market
inefficiencies caused by the large amounts of Non-
Performing Assets (NPA) in bank portfolios,
accumulated over several years. Discussions on non-
performing assets have been going on for several
years now. One of the earliest writings on NPA
defined them as "assets which cannot be recycled or
disposed off immediately, and which do not yield
returns to the bank, examples of which are: Overdue
and stagnant accounts, suit filed accounts, suspense
accounts and miscellaneous assets, cash and bank
balances with other banks, and amounts locked up in
frauds".
 Public Sector Banks: (PSBs) are a major type of
government owned banks in India, where a
majority stake (i.e. more than 50%) is held by the
Ministry of Finance of the Government of India
or State Ministry of Finance of various State
Governments of India. . The shares of these banks
are listed on stock exchanges. Their main
objective is social welfare.
 Private Sector banks are banks owned by either
the individual or a general partner(s) with limited
partner(s).
BANKS SELECTED:
PUBLIC BANKS:
1. State bank of India
2. Punjab National Bank
PRIVATE BANKS:
1. HDFC
2. AXIS

NEED OF THE STUDY
The study is to compare the Non-Performing Assets
of selected public banks (State Bank of India &
Punjab National Bank) and private banks (HDFC
Bank and Axis Bank).
SCOPE OF THE STUDY
The study covers the comparison of Non-Performing
Assets of selected public (SBI & PNB) and private
(HDFC & AXIS) banks for period of five years i.e,
2017-18 to 2021-22.
OBJECTIVES OF THE STUDY
 To analyse the trends of Gross NPA and NET
NPA of selected public and private sector banks.
 To measure the Gross NPA and Net NPA ratios
of selected public sector banks and private sector
banks.
 To study the relationship between Net profit and
Net NPA of selected public sector banks and
private sector banks.
RESEARCH METHODOLOGY
Source of data:
The study is based on secondary data.
Secondary data:
 The secondary data is collected through the
company website, articles and annual reports of
the companies.
 websites:
www.sbi.com www.moneycontrol.com
www.rbi.co.in www.tickertape.com
TOOLS AND TECHNIQUES
 Tables
 Charts
 Graphs
 Percentages
 Correlation.
Software:
MS Excel
SPSS
LIMITATION OF THE STUDY
This study is limited to selected public (SBI & PNB)
and private (HDFC & AXIS) banks for a period of
five years from 2017-18 to 2021-22.
DATA ANALYSIS AND INTERPRETATION
Introduction:
 The Gross Non-Performing Asset and Net Non-
Performing Asset for five years, starting from
2017-18 to 2021-22, are analyzed.
 The study is done based on the secondary data,
which is obtained from published report of RBI
and other articles and journals.
FORMULAE
 Net Non-Performing Assets = Gross NPA –
(Balance in Interest Suspense account +
DICGC/ECGC claims received and held pending
adjustment + Part payment received and kept in
suspense account + Total provisions held)
 In simple term, Net Non-Performing Asset =
GNPA – Provisions.
 Net advances = Gross Advances – provisions.
 Gross NPA Ratio = Gross NPA/ Goss
advances*100
 Net NPA Ratio = Net NPA/ Net Advances*100
PUBLIC SECTOR BANK: GROSS NPA
Table No. 4.1Rs.in Cr
GROSS NPA
YEAR SBI PNB TOTAL
2017-18 2,23,427.46 86,620.05 3,10,047.51
2018-19 1,72,750.36 78,472.70 2,51,223.06
2019-20 1,49,091.85 73,478.76 2,22,570.61
2020-21 1,26,389.02 1,04,423.42 2,30,812.44
2021-22 1,12,023.37 92,448.04 2,04,471.41
Chart 4.1

Interpretation
The above table shows the Gross NPA of selected public banks i.e., SBI and Punjab National bank. The gross
NPA of SBI was highest (2,23,427.46) in the year 2017-18 and lowest (1,12,023.37) in the year 2021-22. The
gross NPA of SBI is declining from past five years. The gross NPA of PNB was highest (1,04,423.42) in the
year 2020-21 and lowest (73,478.76) in the year 2019-20.
PUBLIC SECTOR BANK: NET NPA
Table No. 4.2Rs. in Cr
NET NPA
YEAR SBI PNB TOTAL
2017-18 1,10,854.70 48,684.29 1,59,538.99
2018-19 65,894.74 30,037.66 95,932.40
2019-20 51,871.30 27,218.89 79,090.19
2020-21 36,809.72 38,575.70 75,385.42
2021-22 27,965.71 34,908.73 62,874.44
Chart 4.2
Interpretation
The above table shows the Net NPA of selected public banks i.e., SBI and Punjab National bank. The Net NPA
of SBI was highest (1,10,854.70) in the year 2017-18 and lowest (27,965.71) in the year 2021-22. The Net NPA
of SBI is declining from past five years. The Net NPA of PNB was highest (48,684.29) in the year 2017-18 and
lowest (27,218.89) in the year 2019-20.
PRIVATE SECTOR BANK: GROSS NPA
Table No. 4.3 Rs. in Cr
GROSS NPA
YEAR AXIS HDFC TOTAL
2017-18 34,248.64 8,606.97 42,855.61
2018-19 29,789.44 11,224.16 41,013.60
2019-20 30,233.82 12,649.97 42,883.79
2020-21 25,314.84 15,086.00 40,400.84
2021-22 21,822 16,140.96 37,962.96
Chart 4.3

Interpretation
The above table shows the Gross NPA of selected Private banks i.e, AXIS and HDFC bank. The gross NPA of
AXIS Bank was highest (34,248.64) in the year 2017-18 and lowest (21,822) in the year 2021-22. The gross
NPA of HDFC Bank was highest (16,140.96) in the year 2020-21 and lowest (8,606.97) in the year 2017-18.
PRIVATE SECTOR BANK: NET NPA
NET NPA
YEAR AXIS HDFC TOTAL
2017-18 16,591.71 2,601.02 19,192.73
2018-19 11,275.60 3,214.52 14,490.12
2019-20 9,360.41 3,542.36 12,902.77
2020-21 6,993.52 4,554.82 11,548.34
2021-22 5,512 4,407.68 9,919.68
Chart 4.4
 INTERPRETATION:
The above table shows the Net NPA of selected Private banks i.e., AXIS and HDFC bank. The Net NPA of
AXIS Bank was highest (16,591.71) in the year 2017-18 and lowest (5,512) in 2021-22The Net NPA of AXIS
Bank was decreasing year by year from 2017-18 to 2021-22 The Net NPA of HDFC Bank was highest
(4,554.82) in the year 2021-22 and lowest (2,601.02) in the year 2017-18.
COMPARISON OF GNPA AND NNPA IN PUBLIC SECTOR
YEAR GROSS NPA NET NPA
2017-18 310047.51 159538.99
2018-19 251223.06 95932.4
2019-20 222570.61 79090.19
2020-21 230812.44 75385.42
2021-22 204471.41 62874.44
Chart 4.5

INTERPRETAION:
The above table shows the comparison of Gross NPA and Net NPA in public sector banks i.e., SBI & PNB The
Gross NPA of Public sector banks was highest in the year 2017-18 and gradually decreasing year by year and
was lowest in the year 2021-22. The Net NPA of Public sector banks was highest in the year 2017-18 and was
lowest in the year 2021-22. Both Gross and Net NPA of public sector banks are decreasing year by year for the
past 5 years i.e., from 2017-18 to 2021-22.
COMPARISON OF GNPA AND NNPA IN PRIVATE SECTOR
YEAR GROSS NPA NET NPA
2017-18 42855.61 19192.73
2018-19 41013.6 14490.12
2019-20 42883.79 12902.77
2020-21 40400.84 11548.34
2021-22 37962.96 9919.68
Chart 4.6
INTERPRETAION:
The above table shows the comparison of Gross NPA and Net NPA in private sector banks i.e., AXIS & HDFC
banks. The Gross NPA of private banks are fluctuating but gradually decreasing year by year and was highest in
the year 2017-18 and lowest in the year 2021-22.The Net NPA of private banks are decreasing year by year and
was highest in the year 2017-18 and lowest in the year 2021-22.
COMPARISON OF GNPA BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR BANK
COMPARISON OF GNPA BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR BANK
YEAR PUBLIC SECTOR BANK PRIVATE SECTOR BANK
2017-18 310047.51 42855.61
2018-19 251223.06 41013.6
2019-20 222570.61 42883.79
2020-21 230812.44 40400.84
2021-22 204471.41 37962396
Chart 4.7

 INTERPRETAION:
The above table shows the comparison of Gross NPA between Public and private sector banks. The Gross NPA
of public sector banks are more than the private sector banks and highest in the year 2017-18 and lowest in the
year 2021-22The Gross NPA of private sector bank are less compared with the public sector banks and highest
in the year 2017-18 and lowest in the year 2021-22.
COMPARISON OF NET NPA BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR BANK
COMPARISON OF NET NPA BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR BANK
YEAR PUBLIC SECTOR BANK PRIVATE SECTOR BANK
2017-18 159538.99 19192.73
2018-19 95932.4 14490.12
2019-20 79090.19 12902.77
2020-21 75385.42 11548.34
2021-22 62874.44 9919.68
Chart 4.8
INTRPRETATION:
The above table shows the comparison of Net NPA between Public and private sector banks. The Net NPA of
public sector banks are more than the private sector banks and highest in the year 2017-18 and lowest in the year
2021-22The Net NPA of private sector bank are less compared with the public sector banks and highest in the
year 2017-18 and lowest in the year 2021-22.
PROVISION COVERAGE RATIO:
 A PCR of 70% or more tells us that the bank is not at risk and the asset quality is taken care of. Also, the
bank will be strong enough to withstand NPAs.
Provisions
Provisions Coverage Ratio = ------------------------- x 100
Gross NPA’s
PROVISION COVERAGE RATIO
Table No. 4.9
PUBLIC SECTOR
YEAR GROSS NPA NET NPA PROVISIONS
2017-18 310047.51 159538.99 150508.52
2018-19 251223.06 95932.4 155290.66
2019-20 222570.61 79090.19 143480.42
2020-21 230812.44 75385.42 155427.02
2021-22 204471.41 62874.44 141596.97
YEAR Provision coverage ratio
2017-18 48.54
2018-19 61.81
2019-20 64.47
2020-21 67.34
2021-22 69.25

 Provision coverage ratio of public sector banks is increasing year by year from 2017-18 to 2021-22. The
provision coverage ratio is very low i.e, 48.54% in the year 2017-18 and very high i.e., 69.25% in the year
2021-22.
PROVISION COVERAGE RATIO
PRIVATE SECTOR
YEAR GROSS NPA NET NPA PROVISIONS
2017-18 42855.61 19192.73 23662.88
2018-19 41013.6 14490.12 26523.48
2019-20 42883.79 12902.77 29981.02
2020-21 40400.84 11548.34 28852.5
2021-22 37962.96 9919.68 28043.28
YEAR Provision coverage ratio
2017-18 55.22
2018-19 64.67
2019-20 69.91
2020-21 71.42
2021-22 73.87
CHART 4.10
 Provision coverage ratio of Private sector banks is increasing year by year from 2017-18 to 2021-22. The
provision coverage ratio is very low i.e., 55.22% in the year 2017-18 and very high i.e., 73.87% in the year
2021-22.
COMPARISON OF PROVISIONS COVERAGE RATIO
Table No. 4.11
YEAR PUBLIC SECTOR PRIVATE SECTOR
2017-18 48.54 55.22
2018-19 61.81 64.67
2019-20 64.47 69.91
2020-21 67.34 71.42
2021-22 69.25 73.87

CHART No: 4.11
The provision coverage ratio of public sector banks are lower than the private sector banks for the last five years
i.e., form 2017-18 to 2021-22. The provision coverage ratio is increasing gradually every year.
RELATION OF NPAs ON PROFITABILITY
Table No. 4.12 Rs in Cr
Correlations
NETNPA NETPROFIT
NETNPA
Pearson Correlation 1 .988**
Sig. (2-tailed) .002
N 5 5
NETPROFIT
Pearson Correlation .988**
1
Sig. (2-tailed) .002
N 5 5
**. Correlation is significant at the 0.01 level (2-tailed).
The above table show the relation between the net profit and Net NPA of private sector banks. The Pearson
correlation shows the value .988. It means there is a positive relation between the net npa and net profits of the
private sector banks.
The significance value is .002. Then we reject th null hypothesis. The significance of correlation is low.
FINDINGS:
 The gross NPA and Net NPA of SBI and PNB are
declining from past five years.
 The gross NPA of SBI was highest (2,23,427.46)
in the year 2017-18 and lowest (1,12,023.37) in
the year 2021-22. and the gross NPA of PNB was
highest (1,04,423.42) in the year 2020-21 and
lowest (73,478.76) in the year 2019-20.
 The Gross NPA of Public sector banks was
highest in the year 2017-18 and gradually
decreasing year by year and was lowest in the
year 2021-22.
 The Net NPA of Public sector banks was highest
in the year 2017-18 and was lowest in the year
2021-22.
 Both Gross and Net NPA of public sector banks
are decreasing year by year for the past 5 years
i.e., from 2017-18 to 2021-22.
 The Gross NPA of private banks are fluctuating
but gradually decreasing year by year and was
highest in the year 2017-18 and lowest in the year
2021-22.
 The Net NPA of private banks are decreasing year
by year and was highest in the year 2017-18 and
lowest in the year 2021-22.
 The Gross NPA of public sector banks are more
than the private sector banks and highest in the
year 2017-18 and lowest in the year 2021-22
 The Gross NPA of private sector bank are less
compared with the public sector banks and
PRIVATE SECTOR BANK
NET NPA NET PROFITS
19192.73 49986.84
14490.12 37705.03
12902.77 27884.54
11548.34 25754.78
9919.68 17762.41

2021-22.
 The Net NPA of public sector banks are more
than the private sector banks and highest in the
year 2017-18 and lowest in the year 2021-22
 The Net NPA of private sector bank are less
compared with the public sector banks and
2021-22.
 Provision coverage ratio of public sector banks is
increasing year by year from 2017-18 to 2021-22.
 The provision coverage ratio is very low i.e.,
48.54% in the year 2017-18 and very high i.e.,
69.25% in the year 2021-22.
 The Pearson correlation shows the value 0.836. It
means there is a positive relation between the net
NPA and net profits of the public sector banks.
The Pearson correlation shows the value .988. It
means there is a positive relation between the Net
NPA and net profits of the private sector banks.
SUGGESTIONS:
 Advances provided by banks need to be done pre-
sanctioning evaluation and post-disbursement
control so that NPA can decrease.
 Good management needed on the side of banks to
decrease the level of NPA. Proper selection of
borrowers & follow ups is required to get timely
repayment.
 The banks should ensure that loans are diversified
across several customer segment.
 The banks have to monitor early warnings signals
and taking immediate appropriate remedial action.
 Knowing a client’s profile thoroughly and
preparing a credit report by paying frequent visits
to the clint and his business unit.
 Reducing the impact of operational risks by
measuring them and mitigating or insuring them.
CONCLUSION:
The study observed that there is increase in advances
over the period of the study. However, the decline in
ratio of NPAs indicates improvement in the asset
quality of Indian public sector banks and private
sector banks. It is found on the basis of analysis that
there is significant improvement in the management
of nonperforming assets of the public sector banks in
India. The study finally observes that the prudential
and provisioning norms and other initiatives taken by
the regulatory bodies has pressurized banks to
improve their performance, and consequentlyresulted
into trim down of NPA as well as improvement in the
financial health of the Indian banking system.
But at the same time reforms failed to bring banking
system at a par with international level and still the
Indian banking section is mainly controlled by
government as PSB’s being leaders in this sphere. It
is suggested that government should formulate bank
specific policies and should implement these policies
through Reserve Bank of India for up liftmen of
Public Sector Banks. Public sector banks should try to
upgrade technology and should formulate customer
friendly policies to face competition at national and
international level.

Non Performing Assets A Comparative Study of Public and Private Sector Banks

In this document

More Related Content

What's hot

Similar to Non Performing Assets A Comparative Study of Public and Private Sector Banks

More from ijtsrd

Recently uploaded

Non Performing Assets A Comparative Study of Public and Private Sector Banks