Non Performing Assests and Impact of Its Profitability

Topics: Bank, Fractional-reserve banking, Banking in India Pages: 59 (16232 words) Published: May 12, 2013

Executive Summery

The future of Indian Banking represents a unique mixture of unlimited opportunities and various challenges. On the one hand we see the scenario represented by the rapid process of globalization presently taking shape bringing the community of nations in the world together, transcending geographical boundaries, in the sphere of trade and commerce, and even employment opportunities of individuals. All these indicate newly emerging opportunities for Indian Banking. But on the darker side we see the accumulated morass, brought out by three decades of controlled and regimented management of the banks in the past. It has siphoned profitability of the many banks, accumulated bloated NPA and threatens Capital Adequacy of the Banks and their continued stability. New Private Sector Banks in India can solve their problems only if they assert a spirit of self-initiative and self-reliance through developing their in-house expertise. They have to imbibe the banking philosophy inherent in de-regulation NPA is a problem created by the Banks and they have to find the cause and the solution - how it was created and how the Banks are to overcome it. An attempt is made in this study the present situation and to arrive at a solution to solve this problem.

Design of the study

Title of the project:

“Non Performing Assets and its impact on Profitability of New Private Sector Banks”.

Scope of study: Scope of my study restricted only to 7 New Private Sector Banks NPA data’s and Advances, and for Comparison of Credit risk path 7 old selected Private Banks is taken.

Need For Study:

• This study will help to know the recent norms of NPA. • This study helps to know how NPA Causing Problems to Banking Sector and what might be the solution to overcome from this problem and also its impact on Profitability of New Profit Banks.


Profitability is considered as a benchmark for evaluating performance of any business enterprise including the banking industry. However, increasing Non- Performing Assets, have a direct impact on profitability of banks and financial institutions. Legally speaking banks and financial institutions are not allowed to book income on such account and at the same times they are forced to make provision on such assets. So This project is undertaken to now impact of NPA on Profitability of New Private Sector Banks.

Objectives of Study

1. To study the RBI norms on Non Performing Assets, and the various reasons for the existence of huge level of NPA in Indian banking. 2. To know the performance comparison of New Private Banks Non performing asset for past 3 years. 3. To know the impact of non performing assets on profitability of New Private Banks, and comparison of credit risk path of New Private Banks with 7 selected Old Private Banks. 4. To study the various steps taken by the banks to bring down the NPA’s in respective bank branches. 5. To recommend measures for Improving performance and reduction of Non Performing Assets. Methodology

Primary Data:
Views of the concerned officials were gathered by directly interacting with them, and such data was found very useful while analyzing and drawing conclusions. Secondary Data:
• Recent RBI norms of NPA.
• IBA Bulletin 0f 2005-06 is referred to collect data for Net NPA, and Advances. • Web site of UTI Bank and other Web sites.

Plan of analysis:
In this study quadrant analysis is used on the calculated figures. Limitations:

• The study is based mostly on secondary data.
• Data has been drawn from journals, so information may not be complete. • For the analysis only the advances and NPA percentages of banks and operating profit, provisions and contingencies as a whole and net profit of New PSB’s are taken into consideration.

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