Comparative Analysis of NPAs of Public and Private

7/30/2019 Comparative Analysis of NPAs of Public and Private

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Comparative Analysis of NPAs of

Public and Private Sector Banks inIndia

Under Guidance of

Dr. Pooja MalhotraASSISTANT PROFESSOR (USMS)

By

Birendra Debbarma

MBA (FM)

ENROLL NO. 05416659311


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Introduction

The banking industry has undergone a sea changeafter the first phase of economic liberalization in 1991and hence credit management. While the primaryfunction of banks is to lend funds as loans to various

sectors such as agriculture, industry, personal loans,housing loans etc., in recent times the banks havebecome very cautious in extending loans. The reasonbeing mounting non-performing assets (NPAs). An NPA isdefined as a loan asset, which has ceased to generate any

income for a bank whether in the form of interest orprincipal repayment. As per the prudential normssuggested by the Reserve Bank of India (RBI), a bankcannot book interest on an NPA on accrual basis.


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Private Sector Bank All those banks where

greater parts of stake

or equity are held by the

private shareholders and

not by government are

called "private-

sector banks.

Public Sector Banks Public Sector Banks (PSBs)

are banks where a majority

stake (i.e. more than 50%) is

held by a government. The

shares of these banks are

listed on stock exchanges.

There are a total of 26 PSBs

in India.


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A Comparison

Banks Network

Banks Growth

Productivity

Capital Adequacy

Asset Quality

Management Efficiency

Earnings Quality

Liquidity


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Parameter 1: Banks Network


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Parameter 2: Banks Growth

% Growth in Balance

Sheet Size

% Growth in Total Income

2010 2011 2010 2011

New Private Sector Banks 10.86% 23.51% -2.19% 14.63%

Public Sector Banks 17.93% 19.21% 12.46% 16.71%


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Parameter 3: Productivity


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Parameter 4: Capital Adequacy


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Parameter 5: Asset Quality


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Parameter 6: Management Efficiency


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Parameter 7: Earnings Quality


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Parameter 8: Liquidity


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Conclusion

It can be concluded that most of the new private sector bankshave shown better performance than their public sectorcounterparts during the period 2009-11. This in a way is very goodfor Indian banking system since past says that private banks are themost hit during recession. The main reasons for their better

performance were: New private sector banks have shown better net interest income

margin and fee income than most of the public sector banks.

The credit-deposit & investment-deposit ratio of new private sectorbanks were higher which reflected in higher interest income.

The operating efficiency was higher for most of the new privatesector banks.

The Return on Equity (ROE) was higher due to better asset quality.


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Thank You

Documents

Comparative Analysis of NPAs of Public and Private