“A comparative study On

Non-performing assets of top five private sector banks in India”

Submitted ByB.VENKATESWARA RAORegd. No 14481E0050

Under The guidance of Mr. G.KAMALAsst. Professor

The objective of the project was to find how Non-

Performing Assets impact the profitability of the banks

and how it can be reduced.

The study is addressed to the following objectives:

Understand the concept of nonperforming assets of top

five private sector banks.

To study the trend of NPAs during last five years.

Objectives of the study

To evaluate NPAs (Gross and Net) in private sector banks.

To determine the factors affecting NPA.

To evaluate NPAs (Gross and Net) in private sector banks.

To analyse financial performance of banks at different level

of NPA.

The Problems caused by NPAs.

Cont.

The methods which are to use for collect the information to study

and analyze that procedure of methods is called methodology.

Primary data

Secondary data

Primary data

The data which is not already published &personally that data are

collected through using of personal interviews. The data is called “primary data”.

Secondary data

The data which is already published that is called “secondary data”.it is

mainly two kinds of data collected ways. They are as follows.

Methodology of the study:-

Data Collection:

The present study is mainly based on secondary data.

The required data were collected from the annual reports of

the banks through their websites.

Secondary data

The secondary data have been collected from

National Institution of Bank Management, Books, articles

published in financial newspapers and internet.

Cont..

Top 5 Private Sector Banks in India:

Private Sector Banks are the banks in which larger equity share is held by the private

shareholders. These Banks are growing swiftly due to the excellent customer services offered by

them.

There are a large number of private sector banks in India that delivers customer centric

services and offer quality products.

For the purpose of the study top five private banks has been selected.

HDFC

ICICI

Axis bank

Kotak Mahindra bank

IndusInd bank

Company profile

“Housing Development Finance Corporation Limited” (HDFC), popularly known as HDFC Bank was incorporated in the year 1994. Headquartered in Mumbai, HDFC was founded by Hasmukhbhai Parekh.

Among all the private sector banks, HDFC was the first to receive approval from Reserve Bank of India to set up a bank and started its operations in the year 1995. It provides various products like Insurance, Credit cards, Loans, FOREX services, Premium Banking, Private Banking etc.

HDFC

HDFC Bank caters to a wide range of banking services covering commercial and investment banking on the wholesale side and transactional / branch banking on the retail side. The bank has three key business segments

BUSINESS PROFILE:

MANAGEMENT:

Mrs.ShyamalaGopinath holds a Master’s Degree in Commerce

and is a CAIIB. Mrs.Gopinath has 39 years of experience in financial

sector policy formulation in different capacities at RBI.

As Deputy Governor of RBI for seven years and member of the

Board.Mrs.Gopinath had been guiding and influencing the national

policies in the diverse areas of financial sector regulation and

supervision, development and regulation of financial markets, capital

account management, management of government borrowings, forex

reserves managementand payment and settlement systems.

Management

HDFC Bank’s mission is to be a World Class Indian

Bank. The objective is to build sound customer

franchises across distinct businesses so as to be the

preferred provider of banking services for target retail

and wholesale customer segments, and to achieve

healthy growth in profitability, consistent with the bank’s

risk appetite.

BUSINESS FOCUS:

As on 31st March, 2015 the authorized share capital of the Bank is Rs.

550 crore. The paid-up share capital of the Bank as on the said date is

Rs501,29,90,634/- ( 2506495317 ) equity shares of Rs. 2/- each).

The HDFC Group holds 21.67 % of the Bank's equity and about 18.87

% of the equity is held by the ADS / GDR Depositories (in respect of the

bank's American Depository Shares (ADS) and Global Depository Receipts

(GDR) Issues). 32.57 % of the equity is held by Foreign Institutional Investors

(FIIs) and the Bank has 4,41,457 shareholders. 

CAPITAL STRUCTURE:

Industrial Credit and Investment Corporation of India, popularly

known as ICICI was originally formed in the year 1994 by the

initiative of the World Bank and ICICI. Headquartered in

Vadodara, Gujarat, it’s an Indian Multinational Bank, which is

a wholly owned subsidiary of ICICI Limited.

ICICI Bank won the award for the Best Bank – Global Business

Development in 2014. It offers various services like Privilege

Banking, Loans, NRI Accounts, Insurance, Credit cards, etc.

ICICI Group Companies:

ICICI Bank offers a wide range of banking products and

financial services to corporate and retail customers through a variety

of delivery channels and through its group companies.

Investor Relations:

All the latest, in-depth information about ICICI Bank's

financial performance and business initiatives.

Corporate Social Responsibility:

ICICI Bank is deeply engaged in human and economic

development at the national level. The Bank works closely with

ICICI Foundation across diverse sectors and programs

Axis Bank is the third largest private sector bank in India. The Bank offers

the entire spectrum of financial services to customer segments covering Large and

Mid-Corporates, MSME, Agriculture and Retail Businesses.

Axis Bank is one of the first new generation private sector banks to have

begun operations in 1994. The Bank was promoted in 1993, jointly by Specified

Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India),

Life Insurance Corporation of India (LIC), General Insurance Corporation of India

(GIC), National Insurance Company Ltd., The New India Assurance Company Ltd.,

The Oriental Insurance Company Ltd. and United India Insurance Company Ltd.

Axis Bank Ltd. has been promoted by the largest

Financial Institutions of the country, UTI, LIC, GIC and its

subsidiaries. The Bank was set up in 1993 with a capital of

Rs. 115 crore, with UTI contributing Rs. 100 crore, LIC -

Rs. 7.5 crore and GIC and its four subsidiaries

contributing Rs. 1.5 crore each

Promoters:

The Bank has authorized share capital of Rs. 850 crores comprising

4,250,000,000 equity shares of Rs.2/- each.As on 31st March 2016, the Bank

has issued, subscribed and paid-up equity capital of Rs. 476.67 crores,

constituting 2,38,28,31,826 equity shares of Rs.2/- each.

The Bank’s shares are listed on the National Stock Exchange of India Limited

and the BSE Limited. The GDRs issued by the Bank are listed on the London

Stock Exchange (LSE).

The Bonds issued by the Bank under the MTN programme are listed on the

Singapore Stock Exchange.

Capital Structure:

The Bank has a large footprint of 2904 domestic branches (including

extension counters) and 12,743 ATMs spread across the country as on 31st March 2016.

The Bank has a network of 2402 domestic branches (including extension counters) and

12,922 ATMs spread across the country as on 31st March 2014.

The overseas operations of the Bank are spread over its seven international offices with

branches at Singapore, Hong Kong, DIFC (Dubai International Financial Centre),

Colombo and Shanghai and representative offices at Dubai and Abu Dhabi. During the

year, the Bank’s overseas subsidiary namely Axis Bank UK Ltd. commenced banking

operations, Subsidiaries.

Distribution Network:

Kotak Mahindra Bank, previously known as Kotak Mahindra

Finance Limited is a non-banking financial company, which

was established in the year 1995. This bank got the license to

carry out the banking operations in the year 2003.

The bank is not only present in Metro Cities but also in Tier-2

cities. Some of the services provided by this bank are Wholesale

Banking, Privileged Banking, NRI Banking, Insurance and

Finance.

Kotak Mahindra Bank Ltd. operates as a banking company

that provides financial services such as Home Loans, Mutual

Funds, Life Insurance, Term Deposits, Personal Loans, Credit

Cards, Net banking, Mobile banking, ATM, Loan against

property, Business banking solutions..etc. The company was

founded in 1985 and was formerly known as Kotak Mahindra

Finance Limited.

Company Description:

IBA Banking Technology Awards

Best Customer Relationship Achievement – Winner 2008 &

2009

Best overall winner, 2007

Best IT Team of the Year, 4 years in a row from 2006 to 2009

Best IT Security Policies & Practices, 2007

Awards:

Products and Services:

The bank offers complete financial solutions for infinite needs of all

individual and non–individual customers depending on the customer's need –

delivered through a state of the art technology platform. Investment products

like Mutual Funds, Life Insurance, retailing of gold coins and bars etc are

also offered.

BONUS ISSUE OF SHARES:

During the year, pursuant to approval of the shareholders of the Bank

at the Annual General meeting held on 29th June 2015, your Bank issued

91,28,41,920 Bonus shares in the ratio of 1:1 i.e. one equity share for every

one equity share held on the Record Date, to the Members on 10th July

2015.

DIVIDEND:

Your Directors are pleased to recommend a dividend of Rs. 0.50

per equity share entailing a payout of Rs. 110.53 crore including

dividend distribution tax. The dividend would be paid to all the

shareholders, whose names appear on the Register of

Members/Beneficial Holders list on the Book Closure date.

CAPITAL:

During the year, your Bank has allotted 99,91,715 equity shares

(adjusted for bonus) arising out of the exercise of Employees Stock

Options granted to the employees and whole–time directors of your

Bank and its subsidiaries.

IndusInd Bank started its operations in the year 1994

and has it’s headquarter in Mumbai, Maharashtra. The bank

derived its name from the Indus Valley Civilization.

IndusInd Bank has a specialization in the retail

banking and its clients are Corporate & Investment,

Financial Institutions and Private and Government Banking

Institutions.

Products and Services:

In personal panking it offers a wide range of products and services like deposits,

loans, investments, insurance, forex services, demat services, online services and wealth

management services.

In NRI banking it offers money transfer, investment products such as international

deposits, mutual funds, online share trading, etc. The bank also offers property solutions

and insurance loana.

Dividend:

The Earning Per Share (EPS) of the Bank rose to Rs. 39.68 during the year 2015–

16, from Rs. 33.99 in the previous year. Considering the overall improvement in

performance as well as the need to conserve capital for continued growth, the Directors

recommend Dividend of Rs. 4.50 per Equity Share of Rs. 10/– each for the year ended

March 31, 2016. (Dividend for the year 2014–15 was Rs. 4.00 per Equity Share of Rs.10

each).

Share Capital:

The Paid–up Equity Capital of the Bank as at March 31, 2016

consisted of 59,49,86,335 Equity Shares of Rs. 10/– each.

During the year under review, the Bank allotted 5,12,18,640

Equity Shares of Rs. 10/– each at a price of Rs. 845.00 per share

aggregating Rs. 4,327.98 croresthrough a Qualified Institutions

Placement (QIP).

Besides, the Bank also allotted 87,81,360 Equity Shares of Rs.

10/– each to the Promoters of the Bank at a price of Rs. 857.20 per

share, aggregating Rs. 752.74 crores through a Preferential Allotment.

Gross Advances and Net Advances of the banks are increasing trend

this because of increase in size of operations.

Gross non-performing asset (NPA) of the ICICI bank is high when

compared with rest of the private banks.

Bad and doubt debt reserve created of the bank are increases year by

year, and it is taking away the profit.

Total nonperforming asset provision created during 2014-15 is

negative. When compared with rest of the year generated by the bank

during those year.

FINDINGS

During the period of the study positive net Non-Performing Asset

(NPA) ratio is observed for all the banks.

Quality of services provided by the staff is satisfactory, in all

these banks.

Easy repayment and fewer formalities are the main factors

determining customer’s selecting these banks.

Cont…

Effective inspection system should be implemented. While selection the

loan.

Operating staff should scrutinize the level of inventories/receivables

regularly.

Uneven scale of repayment schedule with higher repayment in the initial

years normally is preferred.

There should be proper monitoring of the restructured accounts because

there is every possibility of the loans slipping into NPAs category again

SUGGESTION

The banks should provide training and awareness

programme regarding the repayment of loans, effective use

of funds, repercussions of non-payment etc., for effective

utilization of available funds and for smooth recovery. The banks should improve the customer services of the

bank to a better extent. Large exposure on big corporate or single project should

be avoided.

Cont..