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ABSTRACT
With the introduction of international norms for
income recognition, asset classification and
provisioning in the banking sector, managing NPAs
has emerged as one of the major challenges facing
Indian banks. Banks today are judged not only on
the basis of number of branches and volume of
deposits but also on the basis of quality of assets.
Non-performing assets constitute a major portfolio
of the Banks portfolio and hence are an inevitable
burden on the banking industry. NPAs adversely
affect the profitability, liquidity and solvency of the
banks. This paper analyses the position of NPAs in
selected banks namely State Bank of India (SBI),
Punjab National Bank (PNB) and Central Bank of
India (CBI).It also highlights the policies pursued
by the banks to tackle the NPAs and suggests a
multi-pronged strategy for speedy recovery of NPAs
in banking sector.
Keywords: Non-Performing Assets, Priority sector,
Sector-wise Classifications
I. INTRODUCTION
The incidence of non-performing assets (NPAs) is
affecting the performance of the credit institutions both
*Asst. Professor, Dept. of Commerce, Swami Shraddhanand College, University of Delhi, New Delhi.
** Asst. Professor, Dept. of Business Studies, Deen Dayal Upadhyaya College, University of Delhi, New Delhi.
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Up to one year
20
30
Internal Factors
Diversion of funds for
-Expansion/diversification/modernization.
-Taking up new projects.
-Helping/promoting associate concerns.
Time/cost overrun during the project
implementation.
Inefficient management.
Strained labour relations.
Inappropriate technology/technical problems.
Product obsolescence, etc.
Poor credit Appraisals, monitoring and follow up,
improper SWOT analysis on the part of banks.
External Factors
Recession.
Input or power shortage.
Price escalation.
Exchange rate fluctuation.
Accidents and natural calamities.
Changes in government policy such as excise,
import and export duties, pollution control order
etc.
Willful defaulters have been there because they
knew that legal recourse available to the lenders
is time consuming and slow.
Sickness of the industry also leads to gradual
erosion of the liquidity and units start failing to
honour its obligations for the loan payments.
Heavy funds are locked up in these units.
Political tool-Directed credit to SSI and Rural
sectors has been there
Manipulation by the debtors using political
influence has been a cause for high industrial bad
debts.
Opinion: International Journal of Management 70
GNPA/T.ASSETS
SBI
PNB
CBI
SBI
PNB
CBI
1996-1997
16.02
16.31
25
7.01
6.92
9.55
1997-1998
14.14
14.5
20.47
6.38
6.15
7.91
1998-1999
15.56
14.12
17.41
6.32
6.11
6.9
1999-2000
14.25
13.19
16.63
5.88
5.78
6.87
2000-2001
12.93
11.71
16.06
5.11
5.45
6.88
2001-2002
11.95
11.38
14.7
4.39
5.68
6.42
2002-2003
9.34
11.58
13.06
3.59
5.78
5.68
2003-2004
7.75
9.35
12.55
3.11
4.56
4.88
2004-2005
5.96
5.96
9.5
2.71
3.8
2005-2006
3.9
4.1
6.8
1.95
2.2
2006-2007
2.9
3.5
4.8
1.76
2.1
2.76
2007-2008
2.7
3.2
1.78
1.66
1.89
2008-2009
2.98
1.77
2.67
1.63
1.1
1.6
2009-2010
3.28
1.71
2.32
1.85
1.08
1.34
NNPA/T.ASSETS
SBI
PNB
CBI
SBI
PNB
CBI
1996-1997
7.3
1997-1998
6.07
10.38
14.4
2.89
4.11
4.8
9.57
12.21
2.5
3.84
4.28
1998-1999
7.18
8.96
9.79
2.65
3.66
3.55
1999-2000
6.41
8.52
2000-2001
6.03
6.74
9.84
2.4
3.54
3.76
9.72
2.35
2.95
3.87
2001-2002
5.63
5.32
7.98
2002-2003
4.5
3.86
6.74
1.96
2.48
3.23
1.58
1.77
2.74
2003-2004
3.48
0.98
5.57
1.33
0.44
2.01
2004-2005
2.65
0.2
2.98
1.16
0.1
1.2
2005-2006
1.9
0.3
2.59
0.99
0.1
1.3
2006-2007
1.56
0.76
1.7
0.93
0.4
0.9
2007-2008
1.78
0.64
1.45
0.4
0.9
2008-2009
1.79
0.17
1.24
0.1
0.7
2009-2010
1.72
0.53
0.69
1.03
0.33
0.4
Table 3
Sector-Wise Classification of NPAs of SBI
Year
Priority
Sector (i)
Public Sector
NPAs (ii)
Non Priority
Sector NPAs (ii)
Total NPAs
(i+ii+iii)
2000-01
6876.32
44.44
1090.4
7.05
7506.26
48.51
15472.98
100.00
2001-02
6942.42
44.83
506.4
3.27
8037.05
51.90
15485.87
100.00
2002-03
6171.23
46.55
381.2
2.88
6704.84
50.57
13257.27
100.00
2003-04
5764.83
48.70
109.06
0.92
5963.02
50.38
11836.91
100.00
2004-05
5604.68
48.12
90.32
0.78
5952.43
51.11
11647.43
100.00
2005-06
5906.49
57.51
33.2
0.32
4329.83
42.16
10269.52
100.00
2006-07
5810.19
58.86
149.32
1.51
3911.5
39.63
9871.01
100.00
2007-08
7561.28
60.12
91.16
0.72
4923.64
39.15
12576.08
100.00
2008-09
7010
46.41
163
1.08
7932
52.51
15105
100.00
2009-10
9073
50.87
235
1.32
8529
47.82
17837
100.00
r*
0.82
r**
0.51
-0.54
0.94
0.39
0.52
r* =Coefficient of Correlation between the amounts of different sectors to the total amounts.
r** =Coefficient of Correlation between the proportion of different sectors to the total amounts.
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Table 4
Sector-Wise Classification of NPAs of PNB
Year
Priority
Sector (i)
Public Sector
NPAs (ii)
Non Priority
Sector NPAs (ii)
Total NPAs
(i+ii+iii)
2000-01
1419.98
41.04
46.6
1.35
1993.52
57.61
3460.1
100.00
2001-02
1728.31
41.75
59.43
1.44
2352.12
56.82
4139.86
100.00
2002-03
2039.91
40.96
35.72
0.72
2904.43
58.32
4980.06
100.00
2003-04
1979.17
42.38
65.12
1.39
2625.84
56.23
4670.13
100.00
2004-05
1740.76
46.53
39.52
1.06
1961.06
52.42
3741.34
100.00
2005-06
1809.55
57.66
34.16
1.09
1294.57
41.25
3138.28
100.00
2006-07
2511.6
74.08
90.16
2.66
788.51
23.26
3390.27
100.00
2007-08
2761.59
83.20
52.84
1.59
504.87
15.21
3319.3
100.00
2008-09
2436
88.01
0.04
331
11.96
2768
100.00
2009-10
2471
76.88
0.12
739
22.99
3214
100.00
r*
-0.33
r**
0.37
-0.84
0.90
0.16
0.83
r* =Coefficient of Correlation between the amounts of different sectors to the total amounts.
r** =Coefficient of Correlation between the proportion of different sectors to the total amounts.
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Table 5
Sector-Wise Classification of NPAs of CBI
Year
Priority
Sector (i)
Public Sector
NPAs (ii)
Non Priority
Sector NPAs (ii)
Total NPAs
(i+ii+iii)
2000-01
1583.6
48.68
26.96
0.83
1642.77
50.50
3253.33
100.00
2001-02
1708.99
50.63
25.01
0.74
1641.69
48.63
3375.69
100.00
2002-03
1721.04
53.06
123
3.79
1399.41
43.15
3243.45
100.00
2003-04
1724.59
55.78
21.14
0.68
1346.19
43.54
3091.92
100.00
2004-05
1585.44
60.48
12.71
0.48
1023.26
39.03
2621.41
100.00
2005-06
1597.68
59.52
6.47
0.24
1080.03
40.24
2684.18
100.00
2006-07
1598.86
62.16
10.15
0.39
962.97
37.44
2571.98
100.00
2007-08
1651.44
70.28
0.81
0.03
697.59
29.69
2349.84
100.00
2008-09
1587
68.38
59
2.54
675
29.08
2321
100.00
2009-10
1658
67.45
0.33
792
32.22
2458
100.00
r*
0.53
r**
0.39
-0.97
0.98
0.31
0.94
r* =Coefficient of Correlation between the amounts of different sectors to the total amounts.
r** =Coefficient of Correlation between the proportion of different sectors to the total amounts.
The calculated value of coefficient of correlation, r, of the different sectors to the total amounts of sector wise
NPAs observed a positive correlation in case of public sector NPAs, Priority sector and non-priority sector
NPAs, also the proportionate NPA recovery in the Priority Sector has recorded a high degree of negative correlation,
r = - 0.97 which shows increase in NPAs in the priority Sector.
Agriculture (i)
SSI(ii)
Others(iii)
Total Priority
Sector (i+ii+iii)
2000-01
2351.18
34.19
2898.42
42.15
1626.72
23.66
6876.32
100.00
2001-02
2520.49
36.31
2794.22
40.25
1627.71
23.45
6942.42
100.00
2002-03
2369.39
38.39
2302.57
37.31
1499.27
24.29
6171.23
100.00
2003-04
2124.26
36.85
1741.07
30.20
1899.5
32.95
5764.83
100.00
2004-05
1912.68
34.13
1371.97
24.48
2320.03
41.39
5604.68
100.00
2005-06
1929.21
32.66
1238.89
20.98
2738.39
46.36
5906.49
100.00
2006-07
1977.18
34.03
1074.78
18.50
2758.23
47.47
5810.19
100.00
2007-08
2915.12
38.55
1260.11
16.67
3386.05
44.78
7561.28
100.00
2008-09
1789
25.52
1712
24.42
3509
50.06
7010
100.00
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2009-10
2322
2168
23.90
4583
0.48
0.34
0.68
0.23
0.12
0.46
50.51
9073
100.00
Table 7
Priority Sector NPAs of PNB
Year
Agriculture (i)
SSI(ii)
2000-01
384.81
27.10
568.88
40.06
2001-02
443.9
25.68
687.09
2002-03
512.23
25.11
2003-04
474.05
23.95
Others(iii)
Total Priority
Sector (i+ii+iii)
466.29
32.84
1419.98
100.00
39.76
597.32
34.56
1728.31
100.00
929.91
45.59
597.77
29.30
2039.91
100.00
928.17
46.90
576.95
29.15
1979.17
100.00
2004-05
354.46
20.36
908.3
52.16
478.6
27.48
1741.36
100.00
2005-06
432.17
23.88
796.94
44.04
580.5
32.08
1809.61
100.00
2006-07
647.39
25.78
991.32
39.47
872.89
34.75
2511.6
100.00
2007-08
1011.61
36.63
910.51
32.97
839.47
30.40
2761.59
100.00
2008-09
537
22.04
1000
41.05
899
36.90
2436
100.00
2009-10
977
39.55
1165
47.17
328
13.28
2470
100.00
0.84
0.73
0.76
0.56
0.41
0.26
Table 8
Priority Sector NPAs of CBI
Year
Agriculture (i)
SSI(ii)
2000-01
346.78
21.90
737.71
46.58
2001-02
396.34
23.19
789.37
2002-03
441.1
25.63
2003-04
459.78
2004-05
Others(iii)
Total Priority
Sector (i+ii+iii)
499.11
31.52
1583.6
100.00
46.19
523.28
30.62
1708.99
100.00
746.75
43.39
533.19
30.98
1721.04
100.00
26.66
683.39
39.63
581.42
33.71
1724.59
100.00
356.34
22.48
627.55
39.58
601.55
37.94
1585.44
100.00
2005-06
413.39
25.87
607.46
38.02
576.83
36.10
1597.68
100.00
2006-07
450.67
28.19
519.47
32.49
628.72
39.32
1598.86
100.00
2007-08
535.83
32.45
636.3
38.53
479.31
29.02
1651.44
100.00
2008-09
417
26.26
659
41.50
512
32.24
1588
100.00
2009-10
421
25.39
922
55.61
315
19.00
1658
100.00
0.40
0.08
0.46
-0.16
0.30
0.04
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The decline in Priority Sector NPAs during 200809 was contributed by the agricultural sector, partly
reflecting the effect of the debt waiver scheme for farmers
announced by the Central Government in 2007.NPAs
of SBI decreased from 34.19 Percent at the end of
March 2001 to 25.59 percent at the end of March 2010.
The NPAs in case of SSIs declined from 42.15 percent
in 2000-01 to 23.90 in 2009-10.The other sectors
amount of NPAs increased from Rs. 1626.72 crores
with 23.66 percent at the end of March 2001 to Rs.
4583 crores with 50.51 percent at the end of March
2010.The calculated value of coefficient of correlation
,r, of Priority Sector shows that there is a positive
Correlation as regards the recovery of mounting NPAs
in Agriculture, SSI and other sectors to the total Priority
Sector of PSBs, coefficient of correlation being
0.48,0.34 and .68 over the period of study in case of
SBI.
Total
PSBs
1999-00
22
27
2000-01
16
27
2001-02
11
13
27
2002-03
14
27
2003-04
11
13
27
2004-05
19
28
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2005-06
23
28
2006-07
27
28
2007-08
28
28
2008-09
27
27
V. CONCLUSION
The incidence of non-performing assets (NPAs) is
affecting the performance of credit institutions both
financially and psychologically. The non-performing
assets have become a major cause of concern. Imbibing
the credit management skills has become all the more
important for improving the bottom-line of the banking
sector. It becomes essential to master the expertise for
monitoring exposure levels, industry scenarios and timely
action in respect of troubled industries. Skills of NPA
management, include working out negotiated
settlements, compromises constituting active settlement,
advisory committees, restructuring and rehabilitation,
effective recourse to suitable legal remedies are to be
supplemented with most suitable legal reforms by banks
to recover dues well in time so that the financial
soundness of the banking sector will not be undermined.
On the international front, the various global risks
associated with the banking industry will expose the
credit assets to greater risks while serious efforts need
to be taken for recovery measures, banks need to be
equipped with necessary risk appraisal system to minimize
credit defaults.
The position of NPAs continues to haunt Indian
banking Sector. Several experiments have been tried to
curb NPAs (viz., BIFR/SICA, lok adalats, DRTs, OTS,
SARFAESI etc) but nothing has hit the mark in tackling
NPAs. The validity of both DRT/ Securitization act was
challenged and still hangs in dilemma, which has
dampened the spirits of bankers.
A clear discrimination is warranted while formulating
any strategy in addressing the problem of genuine and
willful defaulters. There should be a real crackdown on
willful defaulters and their assets whether or not charged
to banks should be declared as national assets and be
disposed in a transparent manner, without major legal
hurdles.
Opinion: International Journal of Management 77
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139562
186100 7544
2661#
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
Amount
Recovered
880
113
2688
No. of Cases
referred
10262
Amount
Involved
772
2144
6273
8517
Amount
Recovered
608
265
4735
3363
No. of Cases
referred
__
Amount
Involved
__
758
9156
8517
Amount
Recovered
__
106
3463
3363
No. of Cases
referred
__
Amount
Involved
__
2142
5819
7263
Amount
Recovered
__
176
3020
4429
No. of Cases
referred
__
Amount
Involved
__
2142
5819
7263
Amount
Recovered**
__
176
3020
4429
No. of Cases
referred
__
Amount
Involved
__
7235
9797
14249
Amount
Recovered**
__
112
3133
4269
No. of Cases
referred
__
Amount
Involved
__
5300
14100
30600
Amount
Recovered**
__
200
3900
11600
No. of Cases
referred
__
Amount
Involved
__
1700
24100
35300
Amount
Recovered**
__
200
4100
10100
268090 3534
160368 4028
186535 3728
548308 2004
778833 6019
616018 12872
476073 13365
2391
41180#
60178#
83942#
61760#
78366#
118642#
140991#
1510
1063
12305
7847
617
149
2117
1156
39288#
132781
1332
185395 4744
801
14317
13244
VI. REFERENCES
1. Pricewaterhouse Coopers, Management of nonperforming assets by Indian banks, IBA Bulletin,
Jan 2004.
2. Samir and Anubha (2005), Management of nonperforming assets (NPAs) in public sector,
private-sector and foreign banks, pp.71-76,
vol.VII, No-1&2 in Musings, journal of
management, Centre For Management
Development.
3. Shri A.S. Shiralashetu and Dr.Akash,
S.B.(2006), Management of non-performing
assets in commercial banks-some issues,
Banking and finance
4. Dr. G.Sudarsana Reddy, (2004) Management of
non-performing assets (NPAs) in Public sector
banks, Banking and finance.
5. Samir, Deepa Kamra and N.S
Rana.(2010)Non-Performing Assets(NPAs)
impede performance of Public Sector Banks,
pp.6-13,Vol. 7,No.3 in Masterstroke, The
Journal of Master School of Management, ISSN
0972-9895
6. Report on Trend and Progress of banking in India,
Various Issues.
7. Statistical Tables relating to Banks in India,
Various Issues.
8. http://rbi.org.in.
9. http://iba.org.in
Opinion: International Journal of Management 80