Non-Performing Assets of Public and Private Sector Banks

The turmoil in the international financial markets of advanced economies, that started around mid-2007, has exacerbated substantially since August 2008. The financial market crisis has led to the collapse of major financial institutions and is now beginning to impact the real economy in the

Circumstances presenting doubt in the client’s ability to achieve and maintain business performance begin with working capital deficiencies. More problems for concern may be recurring operating lost, arrears in dividend, defaulting on loans and adverse financial ratios. The economy can cause business lost as loosing principal customers, work stoppages, legal problems, and inside staff members affecting the business meeting its standards.

Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development.

This is explained due to the fact that money supply increased, because people needed more cash on hand to pay for daily expenses. In order to

21. Banerjee Amalesh and Singh S.K. (2002), Banking and Financial Sector Reforms in India, Deep and Deep Publications Pvt. Ltd., New Delhi-p.265 (Report of K. Madahav Rao Committee (1979)

The major problem is with respect to the Ethics in Banking, which was the major cause of all the crisis and failures. May even a stringent norm come, it will still have some loopholes which the Banking Wizards will find out. Unless the core of banking which is the “Trust of customer” that is gained, no bank can ever be successful. If we observe down the lane, we will see that behind all the failures of the banks was the lack of trust by the customers over banks. And the reason being simple that the banks had forgone the Ethics for the sake of Profitability. And this is the point where the main problem starts, for this being the very foundation is

A significant portion of those overdue bad loans will cause the rapid rise in the Non-Performing Loans (NPL) ratio for financial institutions, resulting in a serious erosion of profit, and causing a chain reaction of bankruptcy and escalated financial crisis. The century-old Lehman Brothers declared bankruptcy in 2008 which caused a domino effect, not only hitting the U.S. economy, but also triggering a global financial tsunami. Such disaster may be explained by the fact that banks recently owns excessive amount of poor credits which may be the result of highly competitive banking environment and reckless credit imprudence, even reaching an alarming level in bank 's NPL ratios. In order to correct this problem, the banking industry must make prudent and cautious decisions in the beginning of loan auditing process and also recognize the dynamic fact that credit status is not static. It shifts greatly throughout the life span of the loan credit. The change is more dramatic especially in the case of past due or non-performing loans. Only when banking institutions are fully aware of the dynamic nature of credit status can the banking institutions avoid making the same mistake again.

The non-performing loans ratio (NPL) of SDB was firstly examined, with reference to exhibit 10, to determine the overall asset quality. SDB’s NPL is 11.6% which is higher than other banks, excluding BoCom at 16.7%. This NPL value is also greater than the industrial average of 7.3% by 1.59 times. This establishes that the assets owned by SDB has generally a lower quality compared to its industrial peers. This NPL ratio reported is not completely accurate as the NPL is calculated from book values, which are completely at the disposition of the bank. It is highly likely that the current NPL is lower than the real NPL, as the bank has an incentive to manipulate the data so that it would attract investors, and boost current stakeholder’s confidence.

In depressed economic times, Banking is an industry that is prone to substantial financial losses, from customer’s closing their depository account to an increase in outstanding loan delinquency. An increase in consumer and commercial loan defaults can damage the integrity of a Bank’s outstanding loan portfolio. Such deterioration can lead to an increase of “Non-Performing Assets”.

2.1.2 It is known that a bank makes a loan to a borrowing customer. The borrower needs to pay the principal back with interest. The process significantly creates a credit and a liability for both the bank and the borrower. So the borrower is credited with a deposit in account and incurs a liability for the amount of the loan. Apart from that, it could be predicted that an asset of banks should be equivalent to the amount of loans and a liability should be equal to deposits as well. If the bank’s assets and liabilities have grown, and so has the borrower’s. Moreover, loans are used not just by individuals but also organizations and even governments.

ASSET QUALITY OF THE BANKS: As per the RBI the banking system in India is self-sufficient & is well funded. The asset quality of the banks is however a concern. Assets of the bank are largely loans such as mortgages, government bonds & cash. A healthy level of asset quality is imperative for survival of the bank. In India’s per the RBI's latest report released on June 17 the banking stability indicator (BSI) that indicates banks financial stability worsened between the quarter of September 2016 to March 2017 due to a deterioration in asset quality and profitability. The report clearly stated that the gross non-performing assets (GNPAs) of some scheduled commercial banks (SCBs) may rise from the existing 9.6 per cent in the month of March

Shri Ajaybhai Patel who has been elected unopposed for the last three tems, on assuming the chame for the first time as a Chairman on 06-01-2003, introduced action plans to improve the profitability of the bank and impressed upon the importance of recovery in NPAs. Under his leadership for the first time in the co-operative sector in the State “Lok Adalat” was used to settle chronically overdue accounts and it received good response from the borrowers.

High Net NPA indicates the high quantity of risky assets in the Banks for which noprovision are made.. In the above graph IDBI Bank and Axis Bank show a decline in Net NPA over the 2 years of time but IDBI Bank (Public Sector Bank) has greater Net NPA as compared to Axis Bank (Private Sector Bank). Hence IDBI Bank has high quality of risky asset .

The main purpose of study is to know how the loans are granted against property and how the worthiness of the borrower is appraised. The study helps us to know the various procedures, policies, criteria and eligibility required during the sanction of loan. It was also undertaken to analyze the financial performance of HDB Financial Services over the past

The recent guidelines on New Bank Licenses by RBI have opened the doors for the entry of third set of private banks into the 73 trillion banking sector. Taking a look at the non-financial players like Aditya Birla Nuvo Ltd, Reliance Capital Ltd, L&T Finance Holdings Ltd, and Bajaj Finserv Ltd.which having a past record of sound credentials and integrity along with being financially sound have run the competition. Not only that, with a successful track record of 10 years, one would normally hope of improved productivity of the banking sector, which has been seen stagnating over the last few years and this gives a new opportunity for new