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Analysis of non performing assets in public sector banks of India

Analysis of non performing assets in public sector banks of India
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In this context, this paper tries to depict both the Gross Non Performing Asset and Net Non Performing Asset position of Public Sector Banks in India and attempts to find whether there is any significant difference among them.

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  1. International Journal of Management (IJM)
    Volume 8, Issue 1, January – February 2017, pp.21–29, Article ID: IJM_08_01_003
    Available online at
    http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=8&IType=1
    Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com
    ISSN Print: 0976-6502 and ISSN Online: 0976-6510
    © IAEME Publication

    ANALYSIS OF NON PERFORMING ASSETS IN PUBLIC
    SECTOR BANKS OF INDIA
    Payel Roy
    Research Scholar, Department of Commerce,
    University of Kalyani, West Bengal, India

    Dr. Pradip Kumar Samanta
    Associate Professor, Department of Commerce,
    University of Kalyani, West Bengal, India

    ABSTRACT
    The Banks being the mobiliser of finances of different sectors of economy, are expected to be
    strong enough to withstand the shocks like inflation, depression etc. and to cushion the other
    financial Institutions along with industries and common people against financial crisis. The Public
    Sector Banks having a large stake of the Government in their Capital structure are preferred by the
    commoners often. In this context, this paper tries to depict both the Gross Non Performing Asset
    and Net Non Performing Asset position of Public Sector Banks in India and attempts to find
    whether there is any significant difference among them. This paper also tries to show the impact of
    GNPA on Net Profit of the selected banks for the last 5 years..
    Key words: Gross Non Performing Assets, Net Non Performing Assets, Net Profit, Public Sector
    Banks
    Cite this Article: Payel Roy and Dr. Pradip Kumar Samanta, Analysis of Non Performing Assets
    in Public Sector Banks of India. International Journal of Management, 8(1), 2017, pp. 21–29.
    http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=8&IType=1

    1. INTRODUCTION
    In a developing country like India, deficiency of capital is a major characteristic which can pose a threat
    for the survival, growth and development of all the three sectors of the economy and the economic
    development as a whole. The role of banking industry is to remove such deficiencies by mobilizing savings
    towards systematic investments.

    2. REVIEW OF LITERATURE
    Ahmad.Z and Dr. Jegadeeshwaran.M. (2013) attempt to study the non performing assets of nationalised
    banks. The data was collected for a period of five years and analysed by mean, CAGR, ANOVA and
    ranking banks. The individual banks got ranks as per their performance in management of NPA‟s. It was
    also tested, whether there is significant difference between nonperforming assets of banks, it was found

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  2. Payel Roy and Dr. Pradip Kumar Samanta

    that there is significant difference in the level of NPA‟s of nationalised banks which reflect their varied
    efficiency in the management of nonperforming assets.
    Parmar.R (2014) attempts to study the trend of Total advances, Net profit, Gross NPA, Net NPA of
    SBI and ICICI Bank. During last three years total advances and net profit has shown growing trend in both
    the banks but compare to SBI, NPA in ICICI bank has shown downward trend because of effective NPA
    management. It also highlights the relationship between Net Profit and Net NPA, while SBI has shown
    positive relationship between Net Profit and Net NPA, negative relationship has been found in ICICI
    between Net Profit and Net NPA.
    Chatterjee.C et al (2012) attempts to focus mainly on the causes and consequences of NPAs, policy
    directives of RBI, initiatives of Indian Government, scenario of NPAs sector wise and bank group wise and
    finally the curative measures for NPAs in India. The paper made a comparative study of NPA‟s of public
    sector banks, private sector banks and foreign sector banks. It also attempted to understand the relationship
    between NPA’s net profit and advances and the recovery of NPAs through various channels.
    Dr. Prasanna.P.K (2014) investigates the determinants of nonperforming loans (NPL) in the Indian
    banking system with the help of panel data modeling. Panel dataset of 31 Indian banks with yearly data
    that spans the period of 2000 to 2012 totaling 372 firm years has been analysed. It is found that higher
    growth rate in savings and GDP is associated with lower NPLs in Indian banks. Higher interest and
    inflation rates contribute positively to rising non performing loans.
    Gavade-Khompi.S (2013) focuses on the comparative analysis of NPAs within the Scheduled
    Commercial Banks in India. The NPAs have been analysed for the period of sixteen (16) years i.e. from
    1997-2012. The data has been analyzed by statistical tools such as percentages and Compound Annual
    Growth Rate (CAGR). The trend values have been calculated with the help of ‘least square method’ of ‘time
    series analysis’. The study observed improvement in the asset quality of SCBs till 2010-2011and
    categorically noticed sudden change in the asset quality in the year 2011-12.
    Joseph. A.L, Dr. Prakash.M (2014) studied the trends of NPA in banking industry from 2008 to 2013,
    the factors that mainly contribute to NPA raising in the banking industry and also provided some
    suggestions to overcome this burden of NPA. They found that compared to private sector banks, public
    sector bank is more in the NPA level. The authors have suggested that Credit Appraisal and Monitoring,
    adherence to documented risk management policy, proper risk architecture, independent credit risk
    evaluation, centralized data base, credit management information system and credit modeling can help
    prevent nonperforming assets to a great extent. Credit modeling, in particular can predict impending
    sickness.
    Das.S and Dutta.A (2014) tried to analyse, with the help of secondary data from RBI website, net non-
    performing asset data of 26 public sector banks, by using Annova statistics, and with the help of SPSS
    software for the period of 6 years, (2008-2013). The main objective of the study is to find out if there are
    any significant differences in the mean variation of the concerned banks. This paper also focuses on the
    reason behind the NPA and its impact on banking operations. The study finds out that there is no
    significant deference between the means of NPA of the banks at five percent level of significance.

    3. RELEVANCE OF THE STUDY
    At one hand the banks provide finance for the different sectors of economy and on the other hand, they
    stimulate money supply in the economy on the other. So, the banking industry is expected to be strong
    enough to withstand the shocks like inflation, depression etc. The banks are also expected to cushion the
    other financial Institutions along with industries and common people against financial crisis. Also, the
    Public sector banks having a large stake of the Government in their Capital structure are preferred by the
    commoners often. So, they should be able to manage their resources and liability position very keenly so
    that the resources are optimally utilized and liabilities are paid off regularly in order to maintain trust of the
    depositors. Non Performing Assets are like a black spot in the asset side of a Bank’s Position Statement
    where the unrecoverable amount of assets is shown. The more it is, the more will be the amount of loss for

    http://www.iaeme.com/IJM/index.asp 22 editor@iaeme.com

  3. Analysis of Non Performing Assets in Public Sector Banks of India

    the banks in their banking business. So, it is the hour of the need to have an analysis of NPA position of the
    banks and to find if there is any significant effect of NPAs on their Net Profits.

    4. OBJECTIVES
    This paper attempts to depict both the GNPA and NNPA position of Public sector Banks in India during
    the last five years and to find whether there is any significant difference among them. This paper also tries
    to find the impact of GNPA on NP of the selected Banks.

    5. RESEARCH METHODOLOGY
    Secondary data are used for this study and are analysed using MS Excel and SPSS softwares. The financial
    data were collected from two websites namely, moneycontrol.com and www. financialservices.gov.in. The
    Public Sector Banks are considered as per the list given by the Department of Finance, Government of
    India. Twenty four Public Sector Banks are initially arranged as per their Gross and Net NPAs and then a
    combined rank is given to each bank. The correlation coefficients are calculated among Gross NPAs of
    different banks to see whether there is any relation among the GNPAs. Then to find if there is any
    significant effect of GNPA on the Net Profits of the banks individually, GNPAs of the banks are analyzed
    again using ANOVA, Regression Analysis and t-test.

    6. ANALYSIS AND FINDINGS OF THE STUDY
    The Gross Non Performing Assets and Net Non Performing Assets of Twenty four Public sector banks of
    India are considered for the last 5 years i.e. from 2011-12 to 2015-16.

    6.1. GNPA and NNPA Position of Public Sector Banks
    The banks are numbered alphabetically in Table 1 and the averages of GNPA and NNPA with respect to
    last five years of the selected banks are shown graphically in Figure 1.
    Table 1 Arrangement of Public Sector Banks alphabetically
    1 Allahabad Bank 13 Oriental Bank Of Commerce
    2 Andhra Bank 14 PNB
    3 Bank Of Baroda 15 Punjab & Sind Bank
    4 Bank Of India 16 SBI
    5 Bank Of Maharashtra 17 State Bank Of Bikaner & Jaipur
    6 Canara Bank 18 State Bank Of Mysore
    7 Central Bank 19 State Bank of Travancore
    8 Corporation Bank 20 Syndicate Bank
    9 Dena Bank 21 Uco Bank
    10 I D B I Bank Ltd. 22 Union Bank Of India
    11 Indian Bank 23 United Bank Of India
    12 Indian Overseas Bank 24 Vijaya Bank

    Average…
    80000
    60000
    40000
    20000
    0
    1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

    Figure 1 Graphical representation of Average GNPA and NNPA of Public sector Banks

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  4. Payel Roy and Dr. Pradip Kumar Samanta

    Fig. 1 showed that there is a huge gap between the NPAs of SBI and NPAs of other banks. GNPA of
    SBI is much ahead of other banks including the second highest one that is PNB. But NNPA of SBI is much
    below which shows that the NPA provisioning is done prudently as compared to other banks. But the NPA
    position of SBI is not satisfactory in overall basis. State Bank of Travancore, State bank of Mysore and
    Punjab & Sind Bank and State Bank of Bikaner & Jaipur have less amount of GNPA and matching amount
    of provisions which renders their GNPA and NNPA ranks to be almost similar.
    In Table 2, the banks are arranged according to the last 5 years average data of GNPA and NNPA
    separately and also a combined ranking is done taking average of the two ranks based on GNPA and
    NNPA respectively.

    Table 2 Statement showing Average GNPA, Average NNPA, GNPA based Rank, NNPA based Rank and Combined
    Rank
    GNPA NNPA
    Average Average Based Based Combined
    Name of the Banks GNPA NNPA Rank Rank Rank
    1 Allahabad Bank 7801.31 5442.33 14 14 14
    2 Andhra Bank 5,938.05 3246.36 10 9 9.5
    3 Bank Of Baroda 16221.14 7849.27 21 19 20
    4 Bank Of India 19720.04 11706.99 22 22 22
    5 Bank Of Maharashtra 4416.47 2725.68 7 7 7
    6 Canara Bank 12507.98 8840.57 19 21 20
    7 Central Bank 12364.72 7248.43 18 18 18
    8 Corporation Bank 5942.03 3817.19 11 12 11.5
    9 Dena Bank 3595.7 2310.52 6 6 6
    10 I D B I Bank Ltd. 11704.31 6309.9 16 16 16
    11 Indian Bank 4895.18 2982.23 8 8 8
    12 Indian Overseas Bank 12903.92 8123.73 20 20 20
    13 Oriental Bank Of Commerce 7150.06 4802.9 13 13 13
    14 PNB 24515.73 14485.36 23 23 23
    15 Punjab & Sind Bank 2433.02 1758.29 2 4 3
    16 SBI 61473.87 30453.8 24 24 24
    17 State Bank Of Bikaner & Jaipur 2610.33 1558.78 4 3 3.5
    18 State Bank Of Mysore 2434.82 1397.34 3 1 2
    19 State Bank of Travancore 2374.52 1414.37 1 2 1.5
    20 Syndicate Bank 6209.37 3577.86 12 10 11
    21 Uco Bank 9802.09 5532.77 15 15 15
    22 Union Bank Of India 11705.83 6532.68 17 17 17
    23 United Bank Of India 5656.43 3580.35 9 11 10
    24 Vijaya Bank 2741.51 1821.34 5 5 5
    From the ranks given in Table 2, it is evident that there is not much difference in the ranking of the
    Banks according to GNPA and NNPA respectively. In most of the cases same ranks are given to the banks
    in both GNPA and NNPA based ranking column. When the combined ranks are taken up it shows that on
    overall basis, State of Travancore, State bank of Mysore and Punjab & Sind Bank hold the first, second
    and third positions respectively, while Bank of India, Punjab National Bank and State Bank of India hold
    the twenty second, twenty third and twenty fourth positions respectively. Since both GNPA and NNPA
    based ranking are quite similar for the banks and since the paper studies the NPAs only, leaving the
    provisioning criterion, so GNPA is taken as a measure for further analysis.

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  5. Analysis of Non Performing Assets in Public Sector Banks of India

    6.2. Analysis of GNPA using Correlation Coefficient
    To find whether there is any significant difference among the NPAs of different banks correlation
    coefficient is calculated to check homogeneity in the data set. It was found that NPAs of most of the banks
    are highly correlated with the NPAs of other banks. Table 3, which showed this calculation, depicted that
    the correlation coefficient of State Bank of Travancore with respect to UCO bank is the least, that too
    above 0.67 while for others, it is more than 90% in most of the cases. It can be concluded here that in
    general, there is huge influence of change in GNPAs of each bank on one another. Thus it means that the
    factors affecting NPAs of the banks are similar in nature as provisions for NPAs are not considered.

    Table 3 Statement showing Correlation among the GNPAs of the selected banks
    NAME OF THE Allhbd Andhra Can Corp Dena
    BANKS Bank Bank BOB BOI BOM Bank CB Bank Bank
    Allahabad Bank 1 0.9959 0.9645 0.9473 0.9281 0.9446 0.9726 0.9732 0.9646
    Andhra Bank 1 0.9651 0.9564 0.9542 0.94944 0.9682 0.983 0.9771
    Bank Of Baroda 1 0.995 0.9551 0.99681 0.9953 0.9892 0.9888
    Bank Of India 1 0.9735 0.99852 0.9825 0.9899 0.9939
    Bank Of Maharashtra 1 0.9596 0.9406 0.9829 0.9878
    Canara Bank 1 0.9852 0.984 0.9877
    Central Bank 1 0.9859 0.9804
    Corporation Bank 1 0.9985
    Dena Bank 1

    IDBI P&S
    NAME OF THE BANKS Bank IndBank IOB OBOC PNB Bank SBI SBOB&J
    Allahabad Bank 0.9785 0.9914 0.9631 0.9593 0.9685 0.975 0.9798 0.9758
    Andhra Bank 0.9831 0.997 0.9725 0.9664 0.9715 0.9865 0.9638 0.98418
    Bank Of Baroda 0.9955 0.9652 0.9942 0.9972 0.9994 0.9123 0.9769 0.904
    Bank Of India 0.9916 0.9601 0.9979 0.9984 0.9962 0.9075 0.9513 0.89506
    Bank Of Maharashtra 0.9707 0.9552 0.9787 0.9737 0.9638 0.9381 0.8914 0.92308
    Canara Bank 0.989 0.9536 0.9946 0.9966 0.9963 0.8931 0.9585 0.88136
    Central Bank 0.9933 0.9617 0.9833 0.99 0.9938 0.9167 0.9881 0.91209
    Corporation Bank 0.998 0.9799 0.9951 0.995 0.9932 0.952 0.9592 0.94332
    Dena Bank 0.9959 0.9775 0.9979 0.9961 0.9933 0.9448 0.9497 0.93402
    I D B I Bank Ltd. 1 0.9807 0.9959 0.9967 0.9978 0.9449 0.9738 0.93755
    Indian Bank 1 0.976 0.9663 0.972 0.9824 0.9577 0.97835
    Indian Overseas Bank 1 0.998 0.9971 0.9324 0.9568 0.92149
    Oriental Bank Of
    Commerce 1 0.9986 0.9203 0.962 0.9099
    PNB 1 0.9239 0.9739 0.91528
    Punjab & Sind Bank 1 0.9119 0.99896
    SBI 1 0.91325
    State Bank Of Bikaner &
    Jaipur 1

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  6. Payel Roy and Dr. Pradip Kumar Samanta
    Syn Uco Union Vij
    NAME OF THE BANKS SBOM SBOT Bank Bank BOI UBI Bank
    Allahabad Bank 0.9479 0.8692 0.9413 0.9479 0.966 0.9482 0.9097
    Andhra Bank 0.9173 0.8515 0.9482 0.9511 0.9751 0.9505 0.909
    Bank Of Baroda 0.8862 0.7439 0.994 0.9915 0.9936 0.8623 0.9849
    Bank Of India 0.8389 0.6983 0.9956 0.9927 0.995 0.8416 0.9817
    Bank Of Maharashtra 0.7774 0.7106 0.9668 0.9486 0.9809 0.8744 0.926
    Canara Bank 0.8475 0.6911 0.9949 0.9952 0.9908 0.8279 0.9877
    Central Bank 0.9197 0.7952 0.9881 0.9756 0.9884 0.8899 0.9799
    Corporation Bank 0.8745 0.7829 0.9884 0.9752 0.9989 0.9085 0.9612
    Dena Bank 0.8522 0.7504 0.9893 0.9809 0.9987 0.8889 0.9622
    I D B I Bank Ltd. 0.8934 0.7844 0.9901 0.9827 0.9982 0.9016 0.9691
    Indian Bank 0.8995 0.8161 0.9454 0.9612 0.9731 0.9279 0.9061
    Indian Overseas Bank 0.8549 0.7294 0.991 0.9914 0.9973 0.8684 0.97
    Oriental Bank Of Commerce 0.8624 0.7358 0.9972 0.9885 0.9985 0.8673 0.9817
    PNB 0.8829 0.7495 0.9938 0.9915 0.9964 0.8719 0.9801
    Punjab & Sind Bank 0.8819 0.8707 0.8949 0.8966 0.9371 0.9685 0.8355
    SBI 0.9626 0.8302 0.9542 0.9576 0.9598 0.8933 0.9491
    State Bank Of Bikaner &
    Jaipur 0.8953 0.8894 0.8835 0.8854 0.9273 0.9751 0.8242
    State Bank Of Mysore 1 0.923 0.8488 0.8475 0.8669 0.9141 0.8391
    State Bank of Travancore 1 0.7181 0.6764 0.7602 0.959 0.6717
    Syndicate Bank 1 0.9809 0.9942 0.8489 0.991
    Uco Bank 1 0.9815 0.8156 0.9719
    Union Bank Of India 1 0.8897 0.9724
    United Bank Of India 1 0.7925
    Vijaya Bank 1

    Table 4 was prepared to show the trends of GNPA and NP of the selected banks over the last five
    years. It is observed that over the years the NP of the banks have reduced while GNPA has increased. Also,
    a very gloomy picture of the PSBs are shown in this table as out of twenty four banks, twelve banks have
    incurred losses in the financial year 2015-16 and the others have made profit that too at reduced rates than
    the last year except State Bank of Travancore which has witnessed an increase in profit. Except Central
    Bank and United Bank of India, others have experienced losses in the year 2015-16 for the first time
    during last five years.
    Table 4 showing trend of GNPA and NP of the selected PSBs
    BANK NAME: Allahabad BANK NAME: Andhra BANK NAME: Bank of BANK NAME: Bank of
    Bank Bank Baroda India
    Year PL GNPA Year PL GNPA Year PL GNPA Year PL GNPA
    – –
    2015- 15,384.5 2015 2015- 5,395.5 40,521.0 2015 6,089.2 49,879.1
    16 -743.31 7 -16 539.84 11,443.63 16 4 4 -16 1 3
    2014- 2014 2014- 3,398.4 16,261.4 2014 1,708.9 22,193.2
    15 620.9 8,357.97 -15 638.44 6,876.54 15 4 5 -15 2 4
    2013- 1,172.0 2013 2013- 4,541.0 11,875.9 2013 2,729.2 11,868.6
    14 2 8,068.04 -14 435.58 5,857.60 14 8 0 -14 7 0
    2012- 1,185.2 2012 1,289.1 2012- 4,480.7 2012 2,749.3
    13 1 5,136.99 -13 3 3,714.49 13 2 7,982.58 -13 5 8,765.25
    2011- 1,866.7 2011 1,344.6 2011- 5,006.9 2011 2,677.5
    12 9 2,058.98 -12 7 1,798.01 12 6 4,464.75 -12 2 5,893.97

    http://www.iaeme.com/IJM/index.asp 26 editor@iaeme.com

  7. Analysis of Non Performing Assets in Public Sector Banks of India

    BANK NAME:Bank of BANK NAME: Canara BANK NAME: Central BANK NAME: Corporation
    Maharastra Bank Bank Bank
    Year PL GNPA Year PL GNPA Year PL GNPA Year PL GNPA
    2015- 2015- – 2015- – 2015-
    16 100.69 10,385.85 16 2,812.82 31,637.83 16 1,117.67 22,720.88 16 -506.48 14,544.25
    2014- 2014- 2014- 2014-
    15 450.69 6,402.06 15 2,702.62 13,039.96 15 606.45 11,873.06 15 584.26 7,106.68
    2013- 2013- 2013- – 2013-
    14 385.97 2,859.85 14 2,438.19 7,570.21 14 1,262.84 11,500.01 14 561.72 4,736.79
    2012- 2012- 2012- 2012-
    13 759.52 1,137.55 13 2,872.10 6,260.16 13 1,014.96 8,456.18 13 1,434.67 2,048.23
    2011- 2011- 2011- 2011-
    12 430.83 1,297.03 12 3,282.71 4,031.75 12 533.04 7,273.46 12 1,506.04 1,274.21

    BANK NAME: Dena BANK NAME: Indian BANK NAME: Indian
    Bank BANK NAME: IDBI Bank Bank Overseas Bank
    Year PL GNPA Year PL GNPA Year PL GNPA Year PL GNPA
    – –
    2015- – 8,560.4 2015- 3,664.8 24,875.0 2015- 8,827.0 2015- 2,897.3 30,048.6
    16 935.32 9 16 0 7 16 711.38 4 16 3 3
    2014- 4,393.0 2014- 12,684.9 2014- 1,005.1 5,670.4 2014- 14,922.4
    15 265.48 4 15 873.39 7 15 7 4 15 -454.33 5
    2013- 2,616.0 2013- 1,121.4 2013- 1,158.9 4,562.2 2013-
    14 551.66 3 14 0 9,960.16 14 5 0 14 601.74 9,020.48
    2012- 1,452.4 2012- 1,882.0 2012- 1,581.1 3,565.4 2012-
    13 810.38 5 13 8 6,449.98 13 4 7 13 567.23 6,607.96
    2011- 2011- 2,031.6 2011- 1,746.9 1,850.7 2011- 1,050.1
    12 803.14 956.5 12 1 4,551.37 12 7 7 12 3 3,920.07

    BANK NAME: Oriental BANK NAME: Punjab &
    Bank of Commerce BANK NAME: PNB Sind Bank BANK NAME: SBI
    Year PL GNPA Year PL GNPA Year PL GNPA Year PL GNPA

    2015- 14,701.7 2015- 3,974.4 55,818.3 2015- 335.9 4,229.0 2015- 98,172.8
    16 156.08 8 16 0 3 16 7 5 16 9,950.65 0
    2014- 2014- 3,061.5 25,694.8 2014- 121.3 3,082.1 2014- 13,101.5 56,725.3
    15 777.5 7,666.22 15 8 6 15 5 9 15 7 4
    2013- 1,139.4 2013- 3,342.5 18,880.0 2013- 300.6 2,553.5 2013- 10,891.1 61,605.3
    14 1 5,617.86 14 8 6 14 3 2 14 7 5
    2012- 1,327.9 2012- 4,747.6 13,465.7 2012- 339.2 1,536.9 2012- 14,104.9 51,189.3
    13 5 4,183.96 13 7 9 13 2 0 13 8 9
    2011- 1,141.5 2011- 4,884.2 2011- 451.2 2011- 11,707.2 39,676.4
    12 6 3,580.49 12 0 8,719.62 12 9 763.44 12 9 6

    BANK NAME: State Bank BANK NAME: State Bank BANK NAME: State Bank BANK NAME: Syndicate
    of Bikaner & Jaipur of Mysore of Travancore Bank
    Year PL GNPA Year PL GNPA Year PL GNPA Year PL GNPA
    2015- 2015- 2015- 2015- –
    16 850.6 3,602.76 16 357.85 3,635.56 16 337.73 3,199.96 16 1,643.49 13,832.16
    2014- 2014- 2014- 2014-
    15 776.87 2,945.14 15 408.8 2,136.42 15 335.53 2,357.05 15 1,522.93 6,442.38
    2013- 2013- 2013- 2013-
    14 731.69 2,732.78 14 204.16 2,818.87 14 304.34 3,076.94 14 1,711.46 4,611.13
    2012- 2012- 2012- 2012-
    13 730.24 2,119.49 13 416.1 2,080.63 13 615.04 1,749.88 13 2,004.42 2,978.50
    2011- 2011- 2011- 2011-
    12 652.03 1,651.47 12 369.15 1,502.62 12 510.46 1,488.75 12 1,313.39 3,182.70

    http://www.iaeme.com/IJM/index.asp 27 editor@iaeme.com

  8. Payel Roy and Dr. Pradip Kumar Samanta

    6.3. Impact of GNPA on Net Profit
    To determine the impact of GNPA on NP of the selected Banks, regression analysis has been done using
    SPSS software, taking GNPA as independent variable and NP as dependent variable. Also fitness of model
    is tested. The hypothesis is set as-
    Ho: There is no impact of GNPA on NP of the selected banks.
    H1: There is a significant impact of GNPA on NP of the selected banks.
    Hypothesis test is done through comparison of T value with the critical values for the banks individually.
    Tables 5 shows the result of the analysis which proves that in most of the banks GNPA proves to be a
    major factor for the change in NP but in opposite direction, they are inversely correlated to each other and
    GNPA has huge influence over the change in NP. Punjab & Sind Bank, SBI, United Bank of India, Vijaya
    Bank and Central Bank have very little influence of GNPA on their NPs. Andhra Bank and Bank of
    Maharashtra have medium level of influence of GNPA as regards to profits. Others banks are having high
    level of dependency of NP on GNPA. A high correlation in almost all the banks between GNPA and NP
    suggests that the association between them is strong and the negative value shows that as the GNPA grows
    the NP falls. For Andhra Bank, Bank Of Maharashtra, Central Bank, Punjab & Sind Bank, SBI, State Bank
    Of Mysore, State Bank of Travancore, Union Bank Of India, United Bank of India and Vijaya Bank, the
    significance value is higher than the 0.05 which renders the model unfit for the data considered. T value of
    the data in absolute terms, relating to all the banks are more than critical values. So in case of all selected
    banks, null hypothesis is rejected. Thus it can be concluded here that there is an effect of GNPA on NP of
    the banks concerned which is further proved by high correlation between these two variables for all the
    banks.
    Table 5 Statement showing Test of Hypothesis:
    COR REG F P T MODEL
    Sl.No. NAME OF THE BANKS COEFF VALUE VALUE VALUE VALUE FIT H0
    1 Allahabad Bank -0.973 0.928 52.572 .005b -7.251 Y Rejected
    2 Andhra Bank -0.775 0.467 4.499 .124b -2.121 N Rejected
    3 Bank Of Baroda -0.981 0.949 75.183 .003b -8.671 Y Rejected
    4 Bank Of India -0.969 0.919 46.6 .006b -6.826 Y Rejected
    5 Bank Of Maharashtra -0.794 0.507 5.119 .109b -2.263 N Rejected
    6 Canara Bank -0.969 0.918 45.736 .007b -6.763 Y Rejected
    7 Central Bank -0.672 0.269 2.473 .214b -1.573 N Rejected
    8 Corporation Bank -0.973 0.928 52.434 .005b -7.241 Y Rejected
    9 Dena Bank -0.99 0.973 146.599 .001b -12.108 Y Rejected
    10 I D B I Bank Ltd. -0.98 0.948 73.634 .003b -8.581 Y Rejected
    11 Indian Bank -0.959 0.894 34.783 .010b -5.898 Y Rejected
    12 Indian Overseas Bank -0.995 0.987 296.089 .000b -17.207 Y Rejected
    13 Oriental Bank Of Commerce -0.975 0.934 57.849 .005b -7.606 Y Rejected
    14 PNB -0.988 0.968 122.361 .002b -11.062 Y Rejected
    15 Punjab & Sind Bank -0.527 0.036 1.151 .362b -1.073 N Rejected
    16 SBI -0.65 0.23 2.196 .235b -1.482 N Rejected
    State Bank Of Bikaner & 34.294 .010b
    17 Jaipur 0.959 0.893 5.856 Y Rejected
    18 State Bank Of Mysore -0.375 -0.146 0.492 .534b -0.701 N Rejected
    19 State Bank of Travancore -0.841 0.61 7.266 .074b -2.695 N Rejected
    20 Syndicate Bank -0.95 0.87 27.75 .013b -5.268 Y Rejected
    21 Uco Bank -0.93 0.82 19.211 .022b -4.383 Y Rejected
    22 Union Bank Of India -0.831 0.587 6.689 .081b -2.586 N Rejected
    23 United Bank Of India -0.658 0.245 2.295 .227b -1.515 N Rejected
    24 Vijaya Bank -0.688 0.298 2.701 .199b -1.644 N Rejected

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  9. Analysis of Non Performing Assets in Public Sector Banks of India

    7. CONCLUSIONS
    The analysis carried on in this paper about GNPA shows that the overall NPA position of all the banks is
    deteriorating over the years. Since there is a negative high correlation between GNPA and NP, the profit
    gradually decreases as the GNPA grows which has become a serious concern right now. In the financial
    year 2015-16, most of the banks’ profit has reduced considerably. Some of the banks have incurred losses
    too. The losses due to increase of NPA can’t be avoided only by making provisions against NPA.
    Provisioning can act as cushion for NPA losses but it can’t be regarded as a solution for growing NPAs in
    all the selected PSBs. The banks advancing loans should be cautious enough to consider the backgrounds
    of loan receiver and make the recovery procedure more stringent. Also, the transparency in disclosure
    norms should be adhered to diligently by the banks so that the investors’ trust can be maintained.

    7.1. Limitations of the Study
    For this study, only Public Sector Banks are considered where overall picture of NPAs of Banking Industry
    is not depicted. Due to lack of information from reliable sources about three Public sector banks, they had
    to be left out. Also, in this study GNPA is taken as a base to find NPA position of the banks which ignored
    prudency of provisioning. Here, only the effect of GNPA on Net profit is analysed, reasons behind such
    NPAs are not considered.

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    http://www.iaeme.com/IJM/index.asp 29 editor@iaeme.com

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