I. INTRODUCTION MEANING OF NPA

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1 ISSN: (Online) RESEARCH HUB International Multidisciplinary Research Journal (RHIMRJ) Research Paper Available online at: A study on Recent Trend of Non-Performing Assets in Public Sector Banks as well as Foreign Sector Banks in India Tushar Mehta 1st Research Scholar, Dept of Commerce, Centre for research and development Rai University Ahmedabad, Gujarat. (India) Dr. Nilam Panchal 2nd B.K. School of Management Gujarat University Ahmedabad, Gujarat (India) Abstract: Banks are the integral part of the economy. The development of banking sector of any country is a sign of developing economy. The more strong the banking sectors of the country the stronger the performance of economy of that country. But the banking sector has been seriously facing a threat of Non-Performing Assets and hurdles its development. Last few years has remained an evident of increasing level of Non-Performing Assets in our countries banking sector. In simple words Non- Performing Assets is nothing but those assets of banks which has ceased to generate income to the banks. In other words when the borrower fails to pay the principal amount or interest amount or both to the banks over a specific period of time it is termed as Non-Performing Assets for the bank. The researcher here try to bring in light the actual position of NPAs in public sector as well as foreign sector banks in India in last 13 years i.e. from to The purpose of the paper is to bring the actual figures in light about the Gross NPAs and Net NPAs of both the sector banks and to compare the actual position of our own public sector banks with that of foreign sector banks in India. Keywords: Banks, Non-performing Assets, bad loans, Assets. I. INTRODUCTION Banks plays a vital role in the development and stability of any countries economy. It is said that the stronger the banking industry of any country, faster the economic growth of that country. Banks are the integral part of any country s economy. Similarly for the developing country like India the strong banking industry is must for the long term growth and development of the economy. The banking industry in India is growing very rapidly. But the only factor that hurdle the fast developing banking industry of India is the problem of rising level of NPA S. The mounting level of NPA s in the banking sector directly affects the working and performance of the banks. NPA s do not generate any income and on the other hand banks need to make provisions against such NPA s as per the rules of RBI out of their profit. It therefore sometime reduces the efficiency of the banks. It s always blamed that as compared to the public sector banks, foreign sector banks are better in managing the NPA s. With the intention to find out the actual position and performance of both the sector banks and to draw the true conclusion was the main objective of the paper. II. MEANING OF NPA To make it very easy, NPA s can be simply defined as an asset that have stop generating income for the banks. As per the revised assets classification norm by the RBI, a non-performing asset (NPA) is a loan or an advance where Interest and /or installment of principal remain overdue for a period of more than 90 Days in respect of a term Loan, The account remains 'out of order' for a period of more than 90 days, in respect of an overdraft/ cash credit (OD/CC), The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, the installment of principal or Interest thereon remains overdue for two crop seasons for short duration crops, the instalment of principal or Interest thereon remains overdue for one crop seasons for long duration crops, Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. III. CLASSIFICATION OF ASSETS The Non-Performing Assets are classified in to following three types with effect from March 31, 2005: Substandard Assets: A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. A general provision of 15 per cent on total outstanding should be made and the unsecured exposures which are identified as substandard would attract additional provision of 10 per cent, i.e., a total of 25 per cent on the outstanding balance. Doubtful Assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. 100 per cent of the extent to which the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. In regard to the secured portion, provision may be at 2015, RHIMRJ, All Rights Reserved Page 1 of 5 ISSN: (Online)

2 the rates ranging from 25 per cent to 100 per cent of the secured portion depending upon the period for which the asset has remained doubtful: Loss Assets: A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100 per cent of the outstanding should be provided for. IV. LITERATURE REVIEWS Prashant K. Reddy (2002) in his research paper, A Comparative study on Non-performing assets in India in the global context -similarities and dissimilarities, remedial measures. Emphasize more on strong legal and legislative framework, along with this the paper stressed on utilization of foreign experience to create a tailor made solution to manage NPAs in India. The paper compares the NPA level of Asian countries. The real problem with NPAs in India is not lack of strict prudential norms but lack of legal impediments and time consuming nature of assets disposal process, postponement of the problem in order to report higher earnings and manipulation by the debtors using political influence. It highlights that after the year 1991 the ratio of NPAs in India is consistently improving as in early 90s the focus has been shifted towards improving the quality of assets and better risk management. As a result the net NPAs have continually declined from 14.46% in to 6.74% in While comparing to other Asian countries the NPA level in India reported remarkably low in the year The mechanism used to solve this problem is to strengthening the legal norms. Bring into line the prudential norms with the international standards, and legal action should include formation of ARC and partial disbanding of BIFR. Deepa and Samir (2013) presented a research paper on, A comparative study of non-performing assets(npas) of selected commercial banks in india. In this study carried out on the selected commercial banks i.e. Punjab National Bank (PNB), State Bank of India (SBI) and Central Bank of India (CBI) to know various strategies used by these banks to manage NPAs as well as suggest the strategy for prompt recovery of NPAs in banking sectors. Papers define NPAs as a disorder resulting in nonperformance of a portion of loan portfolio leading to no recovery or less recovery / income to the lender. The paper lengths the period beginning from to and analyse the movements in NPAs sector wise (classification of NPAs) and cause for its occurrence as well as the effects on banks. The paper advise few measures to cut the NPA level in banks, such as improving the recovery management and corporate governance practices, upgrading technology, inculcating ethics in borrower and using debt recovery tribunal. The setting of the Assets Reconstruction Company limited (ARC), Debt Recovery Tribunal (DRT) and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest act (SRFAESI) have been proved very effective in recovering of NPAs in banking sector. Chandan chatterjee and Jeet Mukherjee (2012) in their research paper on the topic Management of npas -A current scenario divides NPAs into three main category 1) substandard 2) doubtful NPA and 3) loss assets: The objective of this paper is to understand the concept of NPAs sector wise (priority sector, public sector and non-priority sector) and compares the NPA level of scheduled commercial banks to understand the relationship between NPAs and net profit and advances. The data has been collected mainly from the RBI reports and bulletins. The frequent shuffle of government policies, huge agricultural loans, default intentionally are some of the main causes behind NPAs shown in this papers. Paper indicate that the share of NPA in priority sector to total npas of public sector bank increased compared to that of non-priority sectors and other sectors.on other hand it also reveals that there is great improvement in recovery of NPAs i.e. the gross advances fall from 5.2% in 2005 to 2.25% in 2011 in all banks group. The important recommendation suggested by this paper are, framing well organised loan policies and rules, SWOT analysis should be done before lending loans, bank should adhere to principles of lending-viz principle of safety, principle of liquidity, and principle of profitability and should critically examine and analyse the reason behind time over run. V. OBJECTIVES The purpose of this paper is to draw attention towards the mounting NPAs of public sector banks and foreign banks in India. To analyse the trend of gross as well as net NPA of the public as well as foreign banks in the last 13 years To draw a proper conclusion to the problem of NPA. VI. DISCUSSION AND FINDINGS Public Sector Bank: The following table shows the Gross advance, Gross NPA and its percentage to Gross advance, Net advance by the public sector banks and the Net NPA along with its percentage to Net advances for the period of 13 years.i.e. from to The gross advance of public sector banks has shown a great increase during this period. I.e. the gross advance has been increased from in to in During these 13 year period the gross advance has been increased almost about 10.5 times. While the Net NPA advances of public sector banks has been increase from in to in It shows almost 12 times increase in the Net NPA advance of public sector banks. 2015, RHIMRJ, All Rights Reserved Page 2 of 5 ISSN: (Online)

3 Table-1 (Amount in ` Billion) YEAR GROSS ADVANCE GROSS NPA GROSS NPA PERCENTAGE NET ADVANCE NET NPA NET NPA PERCENTAGE Source: RBI Notes: 1. Data for are provisional. 2. Data on Public Sector Banks for include the impact of conversion of a non-banking entity into a banking entity GROSS NPA PERCENTAGE NET NPA PERCENTAGE Analysis: The above graph shows the NPA movement in last 13 years in public sector banks. In year the gross NPA was at 11.1 % i.e highest during the selected period. While in it was at 4.4%. The lowest NPA was recorded during i.e. just 2.00 %. While the net NPA during was recorded around 5.8 % while in it has decreased to 2.6 %. On the same hand the lowest NPA was recorded in i.e. just 0.9%. During the that is during 8 years period the NPA shows a decreasing trend in public sector banks. After that period it has shown a continuous rise. Foreign Sector Bank: The following table shows the Gross advance, Gross NPA and its percentage to Gross advance, Net advance by the Foreign banks and the Net NPA along with its percentage to Net advances for the period of 13 years.i.e. from to The gross advance of foreign sector banks has shown a great increase during this period. I.e. the gross advance has been increased from in to in During these 13 year period the gross advance has been increased almost about 6 times. While the Net NPA advance of foreign sector banks has been increase from in to in It shows almost 7 times increase in the Net NPA advance of foreign sector banks. 2015, RHIMRJ, All Rights Reserved Page 3 of 5 ISSN: (Online)

4 Table-2 (Amount in ` Billion) YEAR GROSS GROSS GROSS NPA NET NET NET NPA ADVACNE NPA PERCENTAGE ADVANCE NPA PERCENTAGE Source:RBI Notes: 1. Data for are provisional. 2. Data on Public Sector Banks for include the impact of conversion of a non-banking entity into a banking entity. Analysis: The above graph shows the gross and net NPA movements during the 13 year period of foreign banks in India. The gross Npa during the recorded 5.4 % i.e. highest during the selected time period. While in gross NPA was at around 3.9 %. The lowest gross NPA was recorded during the 2006 to 2008 i.e. during 2 consecutive years.1.8 %. The trend of NPA was decreasing during 2001 to While on the same hand the net NPA s of foreign banks in was 1.9 % i.e. highest among the selected period while during the same was recorded at around 1.1 %. The lowest NPA was recorded in year and i.e. 0.6%. VII. CONCLUSION It has been observed from the above data that there is continuous increase in the advances given by both public as well as foreign banks in India in recent years, and with increase in advances there is unceasing increase in Non Performing Assets too. NPA has remained a headache for both public sector and foreign sector banks. Public sector need to improve their credit management system and strict measures must be taken towards the wilful defaulters. Banks should verify the goodwill and past records of the borrower before sectioning loan. Some recent measures taken by banks to control the mounting level of NPA proved completely helpless and ineffective. As the rising NPAs is a serious threat for the performance and existence of banks as 2015, RHIMRJ, All Rights Reserved Page 4 of 5 ISSN: (Online)

5 well as the whole economy; It is the necessity of time now to take some serious action towards the defaulters to reduce and recover the bad loans. REFERENCES 1. Prashant K. Reddy (2002), A Comparative study on Non-performing assets in India in the global context -similarities and dissimilarities, remedial measures CYTL paper contest. 2. Chandan chatterjee ; Jeet Mukherji; Dr Ratan Das (2012) MANAGEMENT OF NON PERFORMING ASSETS - A CURRENT SCENARIO IRJC Vol. 1 Issue 11, Nov Samir & Deepa karma (2013), A Comparative Analysis of Non- Performing Assets 4. (NPAs) of Selected Commercial Banks in India, opinion international journal of management Vol. 3, No. 1, June Various issues of Reports on trend and progress of banking in India , RHIMRJ, All Rights Reserved Page 5 of 5 ISSN: (Online)