International Journal of Pure and Applied Mathematics

Volume 118 No. 20 2018, 4537-4541

ISSN: 1314-3395 (on-line version)
url: http://www.ijpam.eu
Special Issue A STUDY ON NON- PERFORMING ASSETS IN INDIAN BANKING SECTORijpam.eu

Suvitha K Vikram Gayathri G

MBA II: Department of Management MBA II: Department of Management
Amrita University, Amritapuri Amrita University, Amritapuri
Kollam, India Kollam, India
suvithakvikram1995@gmail.com gayathrigeetha94@gmail.com

Abstract— Indian banking sector has been facing so many to the beneficial segments. The problem of 'Non Performing
serious issues regarding the increasing level of Non- Performing Asset's isn't limited to Indian banks just actually, this is the
Assets (NPAs). The objective of our study is to find out the issue of all nations of the world, regardless of nation is
sector which has higher NPAs (Public/Private sector banks), creating, created or poor. Rathore (2017) In India banks are
causes and control measures for rising NPAs. The articles from going up against colossal issue of Non-Performing Assets
2010 to 2017 is used for the study of NPAs in banking sector of (NPAs). NPA management needs inclusion and
India. Majority of the articles deals with level and controlling
comprehension on the some portion of staff on nonstop
measures of NPAs in Indian banking sector. The best
premise so that there is centered consideration around
indicator for the soundness of the banking sector of a
recovery. Further, the bank employees for NPA management
country is its level of Non-performing resources (NPAs).
ought to be experienced, very much qualified and prepared
Keywords— Non-Performing Assets, Banking sector, causes of with the goal that they can comprehend the issues of
NPAs, controlling measures, Public Sector Banks, credit risk recuperation and manage them successfully. The study done
by Ganesan and Santhanakrishnan (2013) find out that the
sound financial position of a bank relies on the recovery of
credits or its level of Non-performing Assets (NPAs).
I. INTRODUCTION
Decreased NPAs by and large gives the feeling that banks
Banking is considered as the life blood of every country’s have reinforced their credit evaluation forms throughout the
economy. Any issue relating to the banking sector will years and development in NPAs includes the need of
adversely affect the economy. Indian banking sector has arrangements, which cut down the general gainfulness of
been facing so many serious issues regarding the increasing banks. The Indian banking system is confronting a difficult
level of Non- Performing Assets (NPAs). According to RBI, issue of NPA. The greatness of NPA is nearly higher out in
Non-Performing Asset indicates an asset of borrower, which the open parts banks. To enhance the proficiency and
has been classified by a financial institution as sub-standard, productivity of banks the NPA should be decreased and
loss or doubtful asset, with respect to the guidelines relating controlled.
to asset classification. NPAs directly impacts on the
liquidity, profitability and the overall quality of assets and Banks acting as a catalyst in the monitoring of financial
successful survival of banks. The increasing level of default operations and contributes for economic growth of the
is leading to rise in Non-Performing Assets, reducing the country. Satyanarayanan (2016) point out that in his studies
profitability and quality assets in financial statements of that Non-Performing Assets reflect the execution of Banks
banking sector. The issue of NPAs isn't just influencing the and abnormal state of NPAs suggests that there are
bank but also the entire economy. The NPA size on banking substantial quantities of credit defaults that influence the
sector is comparatively higher in public sectors banks. To productivity and total assets of banks and furthermore
maintain the profitability and efficiency of banks the NPA dissolves the esteem of the benefit. The NPAs level of our
must to be controlled and reduced. The level of NPA is best banks is still high when contrasted with the outside bank.
indicator for assessing the health of banking sector of a The issue of recovery isn't with little borrowers yet with
country. One of the key driver of NPAs in the banking sector extensive borrowers and a strict approach ought to be taken
is the Directed loan system under which commercial banks after for taking care of this issue. Meher (2017) focuses on
are required to provide 40% level of their credit to the how this demonetization would influence this most pivotal
priority sector of the financial system. issue of keeping banking industry. The short run effect of
demonetization can be seen on NPA levels at large scale
level by concentrate the present information accessible on
II. METHODOLOGY daily papers yet the correct NPA level for a long run period
This section provides an over-view of the existing research must be predicted. A short term positive effect of
which focuses on a study on Non-Performing Assets in demonetization can be found in which the current NPAs
Indian banking sector. Banking system is considered as a have lessened a bit. Goyel and Piyush (2017) focuses on his
basic part in economic progress and improvement of a nation study is to analyze the non-performing assets, net NPAs
through activation of reserve funds and arrangement of assets furthermore, net NPAs of 8 banks in India and to see the
connection between net benefit, net NPAs also and gross
NPAs. The point of the examination was to break down the

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International Journal of Pure and Applied Mathematics Special Issue

yearly reports of 8 banks to see the circumstance of NPAs in gainfulness of banks the NPA should be lessened and
the nation. As we have done the examination on Net NPAs, controlled. This paper manages understanding the idea of
Net Profit and Gross NPAs, we have discovered the NPAs, its size and real foundations for a record getting to be
connection between Net NPAs and Net Profit. The study non-performing and techniques for overseeing NPA in
concludes that NPAs are higher in public sector banks than Indian banks. The best marker for the soundness of the
that of private sector bank. keeping money industry in a nation is its level of Non-
performing resources (NPAs). Srivastava (2010) the reforms
Pradhan (2012) find out that the amount of NPA constrained in the financial sector helped to a great extent to diminish
the banks to charge higher PLR and PLR related loan costs. NPA in Indian Bank Industry. This paper endeavors to
This will draw in high risk borrowers which, thus, may bring examine the execution of various banks. To analyze the
about more elevated amount of nonperforming progresses in execution of public sector, private sector and remote banks
future. Huge borrowers are observed to be the foremost specific pointers were taken into contemplations. These
defaulters. Mismanagement of the fund is also considered as Indicators were Gross NPAs and Gross Advances. A Study
one of the main cause of NPA. The study focused with on Non-Performing Resources of Indian banks in India,
business banks in Orissa state covering six driving banks, for found that there is a slight change in the benefit quality
example, SBI, Bank of India, Punjab National Bank, ICICI reflected by decrease in the different NPA rate. The bank
Bank, Andhra Bank and Bank of India. Ibrahim and needs to make auspicious move against corruption of good
Thangavelu (2014) In this paper, concentrates more to performing resources.
investigate the idea of NPAs, factors of credit resources the
business banks in India with particular reference to public Again the study done by Satpal (2014) find out that the issue
sector, private sector and foreign banks. The clients and the of NPAs isn't just influencing the bank but also the entire
public would not keep trust on the banks any more if the economy. Truth be told abnormal state of NPAs in Indian
banks have higher rate of NPAs. In this way, the issue of banks is only an impression of the condition of strength of
NPAs must be dealt with in such a way, to the point that the business and exchange. It is important to reduce NPAs to
would not destroy the money related positions and influence enhance the financial sector. This study shows that degree of
the picture of the banks. Das and Dutta (2014) Non- NPA is nearly high in public sector banks as contrasted with
Performing Assets are a threatening issue for public sector private banks. Although different advances have been taken
banks, as overseeing and controlling NPA is essential. A by government to lessen the NPAs yet at the same time a part
loan or rent that does not meet the expressed primary sum should be done to control this issue. Laveena and Guleria
and the intrigue sum installments is named as non- (2016) find out that Banks performance is reflected by its
performing resources. The study concludes that there is no NPA level. The large number of NPA disintegrates the
significant difference between the means of NPA of the estimation of any benefits in banks and it additionally
banks at five percent level of significance. This study also proposes that number of credit defaults in the banks have
focuses of the internal and external causes of the growth of expanded also, total assets of banks have diminished. The
NPAs. Natika (2016) .The crash in the banking sector may development in NPA level expands the levels you need to set
unfavorably affect different segments. A financier should be for arrangements which general declines the investors'
exceptionally mindful in loaning, since banker isn't loaning esteem and benefits as well. In all finished world issue of
cash out of its own capital. A noteworthy bit of the cash expanding Non Performance Assets has been talked about
loaned originates from the stores got from people in general ordinarily. Public sector banks must concentrate to contend
and government share. An endeavor is made in this paper to with private segment banks in each field so they may
break down the components adding to NPAs, the size of likewise enroll their opposition. Banks must give careful
NPAs, purposes behind high NPAs and their effect on Indian consideration with respect to the borrower that has wanted
keeping money tasks, connection between non-performing advance and examine his/her monetary proclamations
resources and business cycles, GDP, Interest rates and so on altogether to maintain a strategic distance from any
and to give reasonable recommendations to decrease NPAs entanglements in future that may prompt NPA. Gopi and
in business banks. Pasha& Srivenkataramana (2014) Paulraj (2015) mentioned in their study about the factors that
mentioned that there is an increasing level of NPA can be are adding to NPA are improper credit poor loan
find out (both gross and net) of public sector banks shows a management policy, business failures, poor recovery of
marked rising trend during the 5 year period 2008-13. For receivables, industrial recession and adverse exchange rates
better management of NPAs, it is helpful to first survey the etc. if the proper management of the NPAs isn't attempted it
causative variables for NPAs so that the remedial moves can would hamper the productivity of the banks. The NPAs
be made as needs be. Presence of NPAs reduce the quality of obliterate the current benefit and intrigue wage and influence
asset report and consequently future wage producing the smooth working of the reusing of the assets.
prospects.

Prasad and Veena (2011) The Indian banking system is

facing a major issue of NPA. The size of NPA is nearly
higher public sector banks. To enhance the effectiveness and

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III. DATA ANALYSIS AND INTERPRETATION

Table 1: Article analysis results

Source: Authors’ Computation

From the systematic study of the articles we found out that

the level of NPAs is higher in the Public Sector Banks
comparing with the Private Sector Banks. After the
implementation of several reforms in the Indian banking
sector, certain measures were taken to reduce the NPAs.
NPAs directly impacts on the liquidity, profitability and the
overall quality of assets and successful survival of banks.
The huge rates of NPAs have a harmful effect on a bank's
benefit in various ways. They are: reduced interest income,
erosion of capital base and reduction in their
Source: Authors’ Computation competitiveness, creation of reserves and provisions that
come from profits, to act as cushions for loan losses etc. The
The articles are categorized into 7 areas like level of NPA, frequency of non-performing resources (NPAs) is
causes of NPA, control measures of NPA, both level and influencing the execution of credit foundations financially.
cause, both cause and control measures, both level and The management of NPAs has a vital importance for
control measures and all the three(level, cause and control). strengthening our banking sector as well as our economy.
The articles are analyzed over years from 2010 to 2017. Out
of the 100 articles, 3% of articles dealing with the study of IV.CONCLUSION
causes of Non-Performing Assets (NPAs), 14% of article
focused on the controlling measures of NPAs, 12% of NPAs are one of the most important threatening issue faced
articles deals with the study of both analysis of level and by banking sector in the current scenario. Through an
causes of NPAs in commercial banks, 28% of articles deals efficient monetary mechanism and controlling measures we
with the focused on both cause and control measures of can reduce the level of NPAs. The objective of our study is
NPAs, 36% of articles deals with the study of both level and to find out the sector in which has higher NPAs
control measures of NPAs, 7% of articles deals with all the (Public/Private sector banks), causes and control measures
three components like ( level, cause and control). More than for rising NPAs. The articles from 2010 to 2017 is used for
51% study conducted during the time period of 2012-2017. the study of NPAs in banking sector of India. Majority of the
From the data we can clearly understand that more number articles deals with the level and controlling measures of
of articles are deals with the study of both level and control NPAs. Out of the total articles we analyzed, we find out that
measure of NPAs in the Indian banking sector. the level of NPAs is higher in Public Sector Banks
comparing with Public Sector Banks. 3% of articles dealing
with the study of causes of Non-Performing Assets (NPAs),
14% of article focused on the controlling measures of NPAs,
12% of articles deals with the study of both analysis of level
Figure 1: Graphical representation of analyzed results and causes of NPAs in commercial banks, 28% of articles
deals with the focused on both cause and control measures of
NPAs, 36% of articles deals with the study of both level and
control measures of NPAs, 7% of articles deals with all the
three components like ( level, cause and control).The root of
the issue of rising NPAs lies in the nature of overseeing
credit chance by the banks and willful defaulters.

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V.REFERENCES Current Engineering and Technology, 4(4),

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8) Das, S. and Dutta, A. (2018). A Study on NPA
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