A PROJECT REPORT

ON

IMPACT OF NPA ON PROFITABILITY:EMPIRICAL STUDY OF

PRIVATE SECTOR BANKS IN INDIA

Submitted to
Marwadi Education Foundations Group of Institutions
In partial fulfillment of the requirement of the award for the degree of
Master of Business Administration
Under
Gujarat Technological University
Under the guidance of
Faculty Guide
Prof. Anupama Dave
Submitted by:
MANALI BHAVASR
Enrolment No.: 128260592002
RIDDHIBA CHUDASAMA
Enrolment No.: 128260592008
MBA Semester III and IV
Marwadi Education Foundations Group of Institutions
MBA Program
Affiliated to Gujarat Technological University
Ahmedabad

STUDENT DECLARATION

We, MANALI BHAVSAR AND RIDDHIBA CHUDASAMA, hereby declare

that the report for comprehensive project entitled Impact of NPQA on Profitability
:Empirical study of private sector banks in India Is a result of my own work and my
indebtedness to other work publications, references, if any, have been duly
acknowledged.

Place: Rajkot

Date:

Student Signature

PREFACE

The institutional banking is a very wide area of management. We have tried to cover
impact of NPA on Profitability area of 12 private sector bank in India .
We have tried to fulfill all the requirements to prepare this report, suggestions from
the guide, colleagues, etc.
It gives us immense pleasure to present this project report. It is of great opportunity
for management students to acquire knowledge about impact of NPA on private
sector bank.

ACKNOWLEDGEMENT

We are thankful to all those whose works, ideas have been useful in writing this
report; we wish to express my sincere appreciation.
First of all we would like to pay my gratitude to our Dean Dr. CHINNAM REDDY SIR.
We also convey my gratitude to ANUPAMA DAVE, who helped and guided me in
the preparation of the project report and also the other faculties of MARWADI
EDUCATION FOUNDATION GROUP OF INSTITUTE.

DATE
Place: RAJKOT

PART-1

INTRODUCTION

It's a known fact that the banks and financial institutions in India face the problem of
swelling non-performing assets (NPAs) and the issue is becoming more and more
unmanageable. In order to bring the situation under control, some steps have been
taken recently. The Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 was passed by Parliament, which is an
important step towards elimination or reduction of NPAs.
MEANING OF NPAs:
An asset is classified as non-performing asset (NPAs) if dues in the form of principal
and interest are not paid by the borrower for a period of 180 days. However with
effect from March 2004, default status would be given to a borrower if dues are not
paid for 90 days. If any advance or credit facilities granted by bank to a borrower
become non-performing, then the bank will have to treat all the advances/credit
facilities granted to that borrower as non-performing without having any regard to the
fact that there may still exist certain advances / credit facility.
NPA IN INDIAN BANKING SYSTEM:
NPA surfaced suddenly in the Indian banking scenario, around the Eighties, in the
midst of turbulent structural changes overtaking the international banking institutions,
and when the global financial markets were undergoing sweeping changes. In fact
after it had emerged the problem of NPA kept hidden and gradually swelling
unnoticed and unperceived, in the maze of defective accounting standards that still
continued with Indian Banks up to the Nineties and opaque Balance sheets.
In a dynamic world, it is true that new ideas and new concepts that emerge through
such changes caused by social evolution bring beneficial effects, but only after
levying a heavy initial toll. The process of quickly integrating new innovations in the
existing set-up leads to an immediate disorder and unsettled conditions. People are
not

accustomed to the new models. These new formations take time to configure,

and work smoothly. The old is cast away and the new is found difficult to adjust.

Marginal and sub-marginal operators are swept away by these convulsions. Banks
being sensitive institutions entrenched deeply in traditional beliefs and conventions
were unable to adjust themselves to the changes. They suffered easy victims to this
upheaval in the initial phase.
Consequently banks underwent this transition-syndrome and languished under
distress and banking crises surfaced in quick succession one following the other in
many countries. But when the banking industry in the global sphere came out of this
metamorphosis to re-adjust to the new order, they emerged revitalized and as more
vibrant and robust units. Deregulation in developed capitalist countries particularly in
Europe, witnessed a remarkable innovative growth in the banking industry, whether
measured in terms of deposit growth, credit growth, growth intermediation
instruments as well as in network.
During all these years the Indian Banking, whose environment was insulated from
the global context and was denominated by State controls of directed credit delivery,
regulated interest rates, and investment structure did not participate in this vibrant
banking revolution. Suffering the dearth of innovative spirit and choking under undue
regimentation, Indian banking was lacking objective and prudential systems of
business leading from early stagnation to eventual degeneration and reduced or
negative profitability. Continued political interference, the absence of competition and
total lack of scientific decision-making, led to consequences just the opposite of what
was happening in the western countries. Imperfect accounting standards and
opaque balance sheets served as tools for hiding the shortcomings and failing to
reveal the progressive deterioration and structural weakness of the country's banking
institutions to public view. This enabled the nationalized banks to continue to flourish
in a deceptive manifestation and false glitter, though stray symptoms of the brewing
ailment were discernable here and there.
The government hastily introduced the first phase of reforms in the financial and
banking sectors after the economic crisis of 1991. This was an effort to quickly
resurrect the health of the banking system and bridge the gap between Indian and
global banking development. Indian Banking, in particular PSBs suddenly woke up
to the realities of the situation and to face the burden of the surfeit of their woes.
Simultaneously major revolutionary transitions were taking place in other sectors of

the economy on account the ongoing economic reforms intended towards freeing the
Indian economy from government controls and linking it to market driven forces for a
quick integration with the global economy. Import restrictions were gradually freed.
Tariffs were brought down and quantitative controls were removed. The Indian
market was opened for free competition to the global players. The new economic
policy in turn revolutionalised the environment of the Indian industry and business
and put them to similar problems of new mixture Of opportunities and challenges. As
a result we witness today a scenario of banking, trade and industry in India, all
undergoing the convulsions of total reformation battling to kick off the decadence of
the past and to gain a new strength and vigor for effective links with the global
economy. Many are still languishing unable to get released from the old set-up, while
a few progressive corporate are making a niche for themselves in the global context.
During this decade the reforms have covered almost every segment of the financial
sector. In particular, it is the banking sector, which experienced major reforms. The
reforms have taken the Indian banking sector far away from the days of
nationalization. Increase in the number of banks due to the entry of new private and
foreign banks; increase in the transparency of the banks' balance sheets through the
introduction of prudential norms and norms of disclosure; increase in the role of the
market forces due to the deregulated interest rates, together with rapid
computerization and application of the benefits of information technology to banking
operations have all significantly affected the operational environment of the Indian
banking sector.
In the background of these complex changes when the problem of NPA was
belatedly recognized for the first time at its peak velocity during 1992-93, there was
resultant chaos and confusion. As the problem in large magnitude erupted suddenly
banks were unable to analyze and make a realistic or complete assessment of the
surmounting situation. It was not realized that the root of the problem of NPA was
centered elsewhere in multiple layers, as much outside the banking system, more
particularly in the transient economy of the country, as within. Banking is not a
compartmentalized and isolated sector delinked from the rest of the economy. As
has happened elsewhere in the world, a distressed national economy shifts a part of
its negative results to the banking industry. In short, banks are made ultimately to

finance the losses incurred by constituent industries and businesses. The

unprepared ness and structural weakness of our banking system to act to the
emerging scenario and de-risk itself to the challenges thrown by the new order, trying
to switch over to globalization were only aggravating the crisis. Partial perceptions
and hasty judgments led to a policy of ad-hoc-ism, which characterized the approach
of the authorities during the last two-decades towards finding solutions to banking
ailments and dismantling

recovery impediments. Continuous concern was

expressed. Repeated correctional efforts were executed, but positive results were
evading. The problem was defying a solution.
The threat of NPA was being surveyed and summarized by RBI and Government of
India from a remote perception looking at a bird's-eye-view on the banking industry
as a whole delinked from the rest of the economy. RBI looks at the banking industry's
average on a macro basis, consolidating and tabulating the data submitted by
different institutions. It has collected extensive statistics about NPA in different
financial sectors like commercial banks, financial institutions, urban cooperatives,
NBFC etc. But still it is a distant view of one outside the system and not the felt view
of a suffering participant. Individual banks inherit different cultures and they finance
diverse sectors of the economy that do not possess identical attributes. There are
distinct diversities as among the 29 public sector banks themselves, between
different geographical regions and between different types of customers using bank
credit. There are three weak nationalized banks that have been identified. But there
are also correspondingly two better performing banks like Corporation and OBC.
There are also banks that have successfully contained NPA and brought it to single
digit like Syndicate (Gross NPA 7.87%) and Andhra (Gross NPA 6.13%). The
scenario is not so simple to be generalized for the industry as a whole to prescribe a
readymade package of a common solution for all banks and for all times.
Similarly NPA concerns of individual Banks summarized as a whole and expressed
as an average for the entire bank cannot convey a dependable picture. It is being
statistically stated that bank X or Y has 12% gross NPA. But if we look down further
within that Bank there are a few pockets possessing bulk segments of NPA ranging
50% to 70% gross , which should consequently convey that there should also be
several other segments with 3 to 5% or even NIL % NPA, averaging the bank's whole

performance to 12%. Much criticism is made about the obligation of Nationalized

Banks to extend priority sector advances. But banks have neither fared better in nonpriority sector. The comparative performance under priority and non-priority is only a
difference of degree and not that of kind.

The assessment of the mix-of contributing factors includes:

1. human factors (those pertaining to the bankers and the credit customers),
2. environmental imbalances in the economy on account of wholesale changes
and also
3. Inherited problems of Indian banking and industry.
Variable skill, efficiency and level integrity prevailing in different branches and in
different banks accounts for the sweeping disparities between inter-bank and intrabank performance. We may add that while the core or base-level NPA in the industry
is due to common contributory causes, the inter-se variations are on account of the
structural and operational disparities. The heavy concentrated prevalence of NPA is
definitely due to human factors contributing to the same.
No bank appears to have conducted studies involving a cross-section of its operating
field staff, including the audit and inspection functionaries for a candid and
comprehensive introspection based on a survey of the variables of NPA burden
under different categories of sectoral credit, different regions and in individual
Branches categorized as with high, medium and low incidence of NPA. We do not
hear the voice of the operating personnel in these banks candidly expressed and
explaining their failures. Ex-bankers, i.e. the professional bankers who have retired
from service, but possess a depth of inside knowledge do not out-pour candidly their
views. After three decades of nationalized banking, we must have some hundreds of
retired Bank executives in the country, who can boldly and independently, but
objectively voice their views. Everyone is satisfied in blaming the others. Bank
executives hold 'willful defaulters' responsible for all the plague. Industry and
business blames the government policies.

Important fact-revealing information for each NPA account is the gap period between
the date, when the advance was originally made and the date of its becoming NPA. If
the gap is long, it is the case of a sunset industry. Things were all right earlier, but
economic variance in trade cycles or market sentiments have created the NPA.
Credit customers who are in NPA today, but for years were earlier rated as good
performers and creditworthy clients ranging within the top 50 or 100. Significant part
of the NPA is on account of clout banking or willfully given bad loans. Infant mortality
in credit is solely on account of human factors and absence of human integrity.
Credit to different sectors given by the PSBs in fact represents different products.
Advance to weaker sections below Rs.25000/- represents the actual social banking.
NPA in this sector forms 8 TO 10% of the gross amount. Advance to agriculture, SSI
and big industries each calls for different strategies in terms of credit assessment,
credit delivery, project implementation, and post advance supervision. NPA in
different sector is not caused by the same resultant factors. Containing quantum of
NPA is therefore to be programmed by a sector-wise strategy involving a role of the
actively engaged participants who can tell where the boot pinches in each case.
Business and industry has equal responsibility to accept accountability for
containment of NPA. Many of the present defaulters were once trusted and valued
customers of the banks. Why have they become unreliable now, or have they?
The credit portfolio of a nationalized bank also includes a number of low-risk and
risk-free segments, which cannot create NPA. Small personal loans against banks'
own deposits and other tangible and easily marketable securities pledged to the
bank and held in its custody are of this category. Such small loans are universally
given in almost all the branches and hence the aggregate constitutes a significant
figure. Then there is food credit given to FCI for food procurement and similar credits
given to major public Utilities and Public Sector Undertakings of the Central
Government. It is only the residual fragments of Bank credit that are exposed to
credit failures and reasons for NPA can be ascertained by scrutinizing this segment.
Secondly NPA is not a dilemma facing exclusively the Bankers. It is in fact an all
pervasive national scourge swaying the entire Indian economy. NPA is a sore throat
of the Indian economy as a whole. The banks are only the ultimate victims, where life
cycle of the virus is terminated.

Now, how does the Government suffer? What about the recurring loss of revenue by
way of taxes, excise to the government on account of closure of several lakhs of
erstwhile vibrant industrial units and inefficient usage of costly industrial
infrastructure erected with considerable investment by the nation? As per statistics
collected three years back there are over two and half million small industrial units
representing over 90 percent of the total number of industrial units. A majority of the
industrial work force finds employment here and the sector's contribution to industrial
output is substantial and is estimated at over 35 percent while its share of exports is
also valued to be around 40 percent. Out of the 2.5 million, about 10% of the small
industries are reported to be sick involving a bank credit outstanding around Rs.5000
to 6000 Crores, at that period. It may be even more now. These closed units
represent some thousands of displaced workers Previously enjoying gainful
employment. Each closed unit whether large, medium or small occupies costly
developed industrial land. Several items of machinery form security for the NPA
accounts should either be lying idle or junking out. In other words, large value of
land, machinery and money are locked up in industrial sickness. These are the
assets created that have turned unproductive and these represent the real physical
NPA, which indirectly are reflected in the financial statements of nationalized banks,
as the ultimate financiers of these assets. In the final analysis it represents instability
in industry. NPA represents the owes of the credit recipients, in turn transferred and
parked with the banks.
Recognizing NPA as a sore throat of the Indian economy, the field level participants
should first address themselves to find the solution. Why not representatives of
industries and commerce and that of the Indian Banks' Association come together
and candidly analyze and find an everlasting solution heralding the real spirit of
deregulation and decentralization of management in banking sector, and accepting
self-discipline and self-reliance? What are the deficiencies in credit delivery that
leads to its misuse, abuse or loss? How to check misuse and abuse at source? How
to deal with erring Corporate? In short, the functional staff of the Bank along with the
representatives of business and industry has to accept a candid introspection and
arrive at a code of discipline in any final solution. And preventive action to be
successful should start from the credit-recipient level and then extend to the bankers.
RBI and Government of India can positively facilitate the process by providing

enabling measures. Do not try to set right industry and banks, but help industry and
banks to set right themselves. The new tool of deregulated approach has to be
accepted in solving NPA.

REASONS FOR THE EXISTENCE OF HUGE LEVEL OF NPAS IN THE INDIAN

BANKING SYSTEM (IBS):
The origin of the problem of burgeoning NPAs lies in the quality of managing credit
risk by the banks concerned. What is needed is having adequate preventive
measures in place namely, fixing pre-sanctioning appraisal responsibility and having
an effective post-disbursement supervision. Banks concerned should continuously
monitor loans to identify accounts that have potential to become non-performing.
To start with, performance in terms of profitability is a benchmark for any business
enterprise including the banking industry. However, increasing NPAs have a direct
impact on banks profitability as legally banks are not allowed to book income on
such accounts and at the same time banks are forced to make provision on such
assets as per the Reserve Bank of India (RBI) guidelines.
Also, with increasing deposits made by the public in the banking system, the banking
industry cannot afford defaults by borrowers since NPAs affects the repayment
capacity of banks.
Further, Reserve Bank of India (RBI) successfully creates excess liquidity in the
system through various rate cuts and banks fail to utilize this benefit to its advantage
due to the fear of burgeoning non-performing assets.
Some of the other reasons NPAs were:

After the nationalization of banks sector wise allocation

disbursements became compulsory.

of credit

Banks were compelled to give credit to even those sectors, which were not
considered to be very profitable, keeping in mind the federal policy.

People in the agricultural sector were hardly interested in returning the loans
as they were confident that the loans with the interest would be written off by
the successive governments.

The small scale industries also availed credit even though they were not sure
of performing to the extent of returning the loans.

Banks were also not in the position to press enough securities to cover the
loans in calls of timings.

Even if the assets were provided they proved to be substandard assets as the
values that could be realized were very low.

Free distribution done during loan mails (congress regime) also contributed
to the heavy increase in NPAs.

The slackness in effort by the bank authorities to collect or recover loan

advances in time also contributes to the increase in NPAs.

Lack of accountability of the officers, who sanctioned the loans led to a caste
whole approach by the officers recovering the loans.

Loans sanctioned to under servicing candidates due to pressure from the

ministers and other politicians also led to the non recovery of debts.

Poor credit appraisal system, lack of vision while sanctioning credit limits.

Lack of proper monitoring.

Reckless advances to achieve the budgetary targets.

Lack of sincere corporate culture, inadequate legal provisions on foreclosure

and bankruptcy.

Change in economic policies/environment.

Lack of co-ordination between banks.

Some of the internal factors of the organization leading to NPAs
are:

Division of funds for expansion, diversification, modernization, undertaking

new projects and for helping associate concerns, this is coupled with
recessionary trends and failure to tap funds in the capital and debt
markets.

Business

failure(

product,

strained labor relations,

marketing

etc.,),inefficient

management,

inappropriate technology, technical problems,

product obsolescence etc.,

Recession , shortage of input, power shortage, price escalation, accidents,

natural calamities, besides externalization problem in other countries
leading to non payment of overdue.

Time/cost overrun during the project implementation stage.

Government policies like changes in the excise duties, pollution control

orders.

Willful

default,

siphoning

off

of

funds,

fraud,

misappropriation,

promoters/directors disputes etc.,

Deficiencies on the part of the banks like delay in release of limits and
delay in release of payments/subsidies by the government.

Operational definitions:
NPA: An asset is classified as non-performing asset (NPAs) if dues in the form of
principal and interest are not paid by the borrower for a period of 90 days.
Standard Assets: Such an asset is not a non-performing asset. In other words, it
carries not more than normal risk attached to the business.

Sub-standard Assets: It is classified as non-performing asset for a period not

exceeding 18 months
Doubtful Assets: Asset that has remained NPA for a period exceeding 18 months is
a doubtful asset.
Loss Assets: Here loss is identified by the banks concerned or by internal auditors
or by external auditors or by Reserve Bank India (RBI) inspection

RBI GUIDELINES ON INCOME RECOGNITION (INTEREST INCOME ON NPAs)

Income Recognition: Income from Non Performing Assets should not recognize
on accrual basis but should be booked as income only when it is actually received.
Therefore interest should not be charged and taken into income account till the
account become standard asset.

Interest charged to be stopped

Provision to be made

Over Due: Any amount due to the Bank under any credit facility is Over due if it is
not paid on the due date fixed by the Bank.
Out of Order: An account should be treated as out of order

If the outstanding balance remains continuously in excess of the sanctioned

limit/ drawing power.

In cases where the outstanding balance in the principal operating account is

less than the sanctioned limit/ drawing power, but there are no credits

continuously for 90 days as on the date of Banks Balance Sheet or Where

are credits are not enough to cover the interest debited during the same
period.
A Non Performing Asset shall be an advance where:
Term Loan: Interest and/ or installment of principal remain over due for a period of
more than 90 days.
Cash Credit/ Over Draft: If the account remains out of order for a period more
than 90 days.
Bills: Overdue for a period of more than 90 days.
Other accounts: Any amount to be received remains overdue for a period of more
than 90 days.
Short duration crops: If the installment of principal or interest there on remains
overdue for two crop seasons.
Long duration crops: If installment of principal or interest there on remains overdue
for One Crop season.
An account would be classified as NPA only if the interest charged during any
quarter is not serviced fully within 90 days from the end of the quarter.

ASSET CLASSIFICATION
Standard Assets:
Is one which does not disclose any problem and which does not carry more than
normal risks attached to the business.
Substandard Assets:
Which has remained NPA for a period of less than or equal to 12 months.

Doubtful Assets:
If it has remained NPA for a period exceeding 12 months.
Loss Assets:
A loss asset is one where loss has been identified by the bank.

RBI GUIDELINES ON PROVISIONING REQUIREMENT OF BANK ADVANCES:

Loss Assets: 100% of the outstanding amount.
Doubtful Assets: 100% of unsecured portion.
Secured portion
Up to one year
One to three years
More than 3 years

20%
30%

1. Outstanding stock of NPA as on 75% w.e.f.31st March, 06

31.3.2004

100% w.e.f.31st March,07

2. Advances classified as doubtful 100% w.e.f.31st March,05

more than 3 years on or after
31.3.2004
Substandard Assets: Secured portion 10% and unsecured portion 20% on total
outstanding.
Standard Assets: A general provision of 0.40% (For direct Agriculture & SME Sector
0.25%). Provisioning for standard assets will be done at corporate office centrally.

GROWTH & DEVELOPMENT (PERCENTAGE SHARE )

BANK

PERCENTAGE

State Bank of India

18%

Punjab
National 6%
Bank
Bank of Baroda
5%
ICICI Bank

5%

Bank of India

5%

Canara Bank

5%

HDFC Bank

4%

IDBI Bank

4%

Axis Bank

3%

Central
India
Others

Bank

of 3%
42%

Market share of leading bank

42%

18% 6%
5%

5%
5%
5%
4% 4% 3% 3%

FIGURE 1:

State Bank of India

Punjab National Bank

Bank of Baroda

ICICI Bank

Bank of India

Canara Bank

HDFC Bank

IDBI Bank

Axis Bank

Central Bank of India

Others

[Source: ICRA, Thomas White Report on Indian Banking]

PERFORMANCE OTHER STATISTICAL DATA

(BALANCE

SHEET/INVESTMENT

PERCENTAGE)

BANK

FY11

SBI

24.16%

PNB

25.15%

BOB

19.92%

Canara Bank

24.90%

BOI

24.45%

ICICI Bank

33.15%

HDFC Bank

25.5%

Axis Bank

29.66%`

35.00%
30.00%
25.00%
20.00%
15.00%

FY

10.00%

FY

5.00%
0.00%

FIGURE 2:

[SOURCE: Annual reports, press releases, earning call transcripts and investor presentations
published by respective banks]

MAJOR BANKS IN INDIA

ABN AMRO Bank

Abu Dhabi Commercial Bank
Allahabad Bank
Andhra Bank
American Express Bank
Bank of India
Bank of Baroda
Bank of Punjab
Bank of Rajasthan
Bank Of Maharastra
Barclays Bank
Barclays Bank
Canara Bank
Central Bank of India
CITIBANK India
Corporation Bank
City Union Bank
Cosmos Co-Operative Bank
Dena Bank
Development Credit Bank
Dhanlakshmi Bank Ltd.
Deutsche Bank
DBS Bank
Export-Import Bank of India
Federal Bank
Global Trust Bank Limited
Guardian Sahakara Bank Niyamita
HDFC Bank Ltd.
ICICI Bank
HSBC Bank
IDBI Bank Limited
Indian Bank
Indian Overseas Bank
IndusInd Bank Limited
Jammu and Kashmir Bank
Karnataka Bank
Karur Vysaya Bank
Kotak Mahindra Bank
Ottapalam Co-operative Urban Bank Ltd.
Oriental Bank of Commmerce
Punjab National Bank
Reserve Bank of India
Saraswat Co-operative Bank
South Indian Bank
Standard Chartered Bank

State Bank of Bikaner and Jaipur

State Bank of Hyderabad
State Bank of India
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Syndicate Bank
Textile Traders Cooperative Bank
Thane Janata Sahakari Bank
The Catholic Syrian Bank Ltd
Tamil Nadu Mercantile Bank
The United Western Bank Ltd.
UCO Bank
Union Bank of India (UBI)
UTI Bank / Axis Bank
United Bank
Vijaya Bank
Yes Bank
Ing Vysya Bank

PRODUCTS PROFILE

The bank, 'The Kumbakonam Bank Limited' as it was then called was incorporated
as a limited company on 31st October, 1904. The first Memorandum of Association

was signed by twenty devoted and prominent citizens of Kumbakonam including

Sarvashri R. Santhanam Iyer, S.Krishna Iyer, V.Krishnaswami Iyengar and
T.S.Raghavachariar. T.S.Raghavachariar was the First Agent of the Bank.
.
( http://www.cityunionbank.com/english/AboutUs.aspx)

It was founded in 1994. Its headquarter is in Mumbai. Their promoters include UTI
the largest and best financial institution in country. Their code and policies ensures
fair practices and fully transparency.
(http://www.axisbank.com/about-us/about-us.aspx)

The Housing Development Finance Corporation Limited (HDFC) was amongst the
first to receive an "in principle" approval from the Reserve Bank of India (RBI) to set
up a bank in the private sector, as part of RBI"s liberalisation of the Indian Banking
Industry in 1994. The bank was incorporated in August 1994 in the name of "HDFC
Bank Limited", with its registered office in Mumbai, India. HDFC Bank commenced
operations as a Scheduled Commercial Bank in January 1995.
(http://www.hdfcbank.com/aboutus/general/default.htm)

IndusInd Bank derives its name and inspiration from the Indus Valley civilisation -a
culture described by National Geographic as 'one of the greatest of the ancient
world' combining a spirit of innovation with sound business and trade practices.
Mr. Srichand P. Hinduja, a leading Non-Resident Indian businessman and head of
the Hinduja Group, conceived the vision of IndusInd Bank -the first of the newgeneration private banks in India -and through collective contributions from the NRI
community towards India's economic and social development, brought our Bank into
being.
(http://www.indusind.com/indusind/wcms/en/home/top-links/about-us/our-profile/index.html)

It was founded in 1929 and its mission is To emerge as the most preferred bank in
the country in terms of brand, values, principles with core competence in fostering
customer aspirations, to build high quality assets leveraging on the strong and
vibrant technology platform in pursuit of excellence and customer delight and to
become a major contributor to the stable economic growth of the nation.
(http://www.southindianbank.com/content/viewContentLvl1.aspx?
LinkIdLvl2=5&LinkIdLvl3=67&linkId=67)

At Karnataka Bank, we understand that all customers are different in unique ways,
which is why, regardless of the size of your business or your aspirations, we treat
every one as individual and special. This means offering you choices, not only in
relation to our products and services but also in the way you interact with us. We
understand the changes in your lifestyle, recognize these changes and support you
with

high

standard

of

professionalism

and

service.

As a premier bank, we have developed comprehensive range of customized

products & services suitable for every kind of market, trade or perceived need
- Business or Personal. They include, borrowing facilities, deposits, providing
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ING Vysya Bank Ltd is a premier private sector bank with retail, private and
wholesale banking platforms that serve over two million customers. With 80 years of
history in India and leveraging INGs global financial expertise, the bank offers a
broad range of innovative and established products and services, across its 527
branches. The bank, which has close to 10,000 employees, is also listed in Bombay
Stock Exchange Limited and National Stock Exchange of India Limited.
(http://www.ingvysyabank.com/personal-banking/ing-vysya/about-us/companyoverview.aspx)

Kotak Mahindra Bank Ltd is a one stop shop for all banking needs. The bank offers
personal finance solutions of every kind from savings accounts to credit cards,
distribution of mutual funds to life insurance products. Kotak Mahindra Bank offers
transaction banking, operates lending verticals, manages IPOs and provides working
capital loans. Kotak has one of the largest and most respected Wealth Management
teams in India, providing the widest range of solutions to high net worth individuals,
entrepreneurs, business families and employed professionals.
(http://aboutus.kotak.com/kotak-mahindra-group/our-businesses.html)

Yes Bank is a private bank in India. It was founded by Ashok Kapur and Rana
Kapoor, with the duo holding a collective financial stake of 27.16%. Mr.Ashok Kapur
was killed in a terrorist attack in 2008 in Mumbai.
Headquarters: Mumbai, india
CEO: Rana Kapoor
(https://www.google.co.in/#q=yes+bank)

Dhanlaxmi Bank Ltd. was incorporated in 1927 at Thrissur, Kerala by a group of

ambitious

and

enterprising

entrepreneurs.Over

the 86 years

that

followed,

Dhanlaxmi Bank with its rich heritage has earned the trust and goodwill of clients. It
is due to our strong belief in the need to seek innovation, deliver best service and
demonstrate responsibility, that we have grown from strength to strength. Be it in the
number of customers, the scale of business, the breadth of our product offerings, the
banking experience we offer or the trust that people invest in us. With more
than 670 touch points across India at your service; our focus has always been on
customizing services and personalizing relations.
(http://www.dhanbank.com/aboutus/about_us.aspx)

ICICI Bank is India's largest private sector bank with total assets of Rs. 5,367.95
billion (US$ 99 billion) at March 31, 2013 and profit after tax Rs. 83.25 billion (US$
1,533 million) for the year ended March 31, 2013. The Bank has a network of 3,529
branches and 11,063 ATMs in India, and has a presence in 19 countries, including
India.
(http://www.icicibank.com/aboutus/about-us.html)

The Lakshmi Vilas Bank Limited (LVB) was founded eight decades ago ( in 1926) by
seven people of Karur under the leadership of Shri V.S.N. Ramalinga Chettiar,
mainly to cater to the financial needs of varied customer segments. The bank was
incorporated on November 03, 1926 under the Indian Companies Act, 1913 and
obtained the certificate to commence business on November 10, 1926, The Bank
obtained its license from RBI in June 1958 and in August 1958 it became a
Scheduled Commercial Bank.

(http://www.lvbank.com/aboutus.aspx)

PROFITABILITY
Mar09
Interest Spread

Mar13

Mar12

Mar11

Mar

--

4.62

4.63

4.87

Adjusted Cash Margin(%)

14.07

15.48

16.93

15.13

Net Profit Margin

13.07

14.77

15.72

13.94

114.99

123.89

107.30

105.47

Return on Net Worth(%)

19.62

22.54

21.36

18.50

Adjusted Return on Net Worth(%)

19.62

22.54

21.34

18.43

Return on Assets Excluding Revaluations

30.44

30.45

24.85

20.68

Return on Assets Including Revaluations

30.44

3.045

24.85

20.68

Return on Long Term Fund(%)

PROFITABILITY RATIOS OF PRIVATE SECTOR BANKS

PROFITABILITY RATIO OF CITY UNION BANK
(http://www.moneycontrol.com/financials/cityunionbank/ratios/CUB)

PROFITABILITY RATIO OF AXIS BANK

PROFITABILITY
Mar09
Interest Spread

Mar13

Mar12

Mar11

Mar

--

--

--

3.95

Adjusted Cash Margin(%)

16.39

16.72

18.58

17.63

Net Profit Margin

15.35

15.47

17.12

16.10

Return on Long Term Fund(%)

75.72

88.84

72.25

66.34

Return on Net Worth(%)

15.64

18.59

17.83

15.67

Adjusted Return on Net Worth(%)

15.64

18.59

17.83

15.69

Return on Assets Excluding Revaluations

707.50

551.99

462.77

395.99

Return on Assets Including Revaluations

707.50

551.99

462.77

395.99

(http://www.moneycontrol.com/financials/axisbank/ratios/AB16)

PROFITABILITIES RATIO OF HDFC BANK

PROFITABILITY
Mar09
Interest Spread

Mar13

Mar12

Mar11

Mar

--

--

--

5.89

Adjusted Cash Margin(%)

17.60

17.55

18.23

16.71

Net Profit Margin

16.04

15.88

16.18

14.76

Return on Long Term Fund(%)

80.09

75.20

59.91

56.08

Return on Net Worth(%)

18.57

17.26

15.47

13.70

Adjusted Return on Net Worth(%)

18.57

17.26

15.47

13.68

Return on Assets Excluding Revaluations

152.20

127.52

545.46

470.19

Return on Assets Including Revaluations

152.20

127.52

545.46

470.19

(http://www.moneycontrol.com/financials/hdfcbank/ratios/HDF01)
Interest Spread

--

5.34

6.42

6.07

4.97

Adjusted Cash Margin(%)

13.59

13.76

14.90

13.03

7.97

Net Profit Margin

12.71

12.59

13.43

10.63

5.29

Return on Long Term Fund(%)

83.03

107.43

81.10

110.36

147.69

Return on Net Worth(%)

13.92

17.79

15.12

16.19

10.39

Adjusted Return on Net Worth(%)

13.92

17.77

15.90

17.76

12.53

Return on Assets Excluding Revaluations

145.78

96.50

81.95

52.71

40.21

Return on Assets Including Revaluations

145.78

101.19

86.79

58.35

46.85

PROFITABILITY RATIO OF INDUSLAND BANK

PROFITABILITY
Mar11
Mar10
Mar09

Mar13

Mar12

(http://www.moneycontrol.com/financials/indusindbank/ratios/IIB)

PROFITABILITY RATIO OF SOUTH INDIAN BANK

PROFITABILITY
Mar13
Mar09
Interest Spread
Adjusted Cash
Margin(%)
Net Profit Margin

4.67
11.36

5.32
11.32

Mar12

Mar11

6.01
12.00

Mar

6.35
11.46

10.53

10.52

11.10

10.69

121.71

155.98

123.92

118.87

Return on Net Worth(%)

16.72

19.82

17.25

15.93

Adjusted Return on Net Worth(%)

16.72

19.78

17.31

15.93

Return on Assets Excluding Revaluations

22.44

17.87

15.00

129.83

Return on Assets Including Revaluations

22.44

19.14

16.35

131.43

Return on Long Term Fund(%)

(http://www.moneycontrol.com/financials/southindbk/ratios/SIB)

PROFITABILITY RATIO KARNATAKA BANK

PROFITABILITY
Mar09

Mar13

Mar12

Mar11

Mar

Interest Spread

4.68

4.20

3.16

5.48

Adjusted Cash Margin(%)

7.80

8.64

7.97

12.80

Net Profit Margin

7.25

7.80

7.04

11.92

102.16

82.03

103.95

119.21

Return on Net Worth(%)

9.47

8.42

9.11

17.01

Adjusted Return on Net Worth(%)

9.35

8.39

9.10

17.01

Return on Assets Excluding Revaluations

131.99

129.08

138.80

128.89

Return on Assets Including Revaluations

131.99

129.08

138.80

128.89

Return on Long Term Fund(%)

(http://www.moneycontrol.com/financials/karnatakabank/ratios/KB04)

PROFITABILITY RATIO OF ING VYASYA BANK

PROFITABILITY
Mar09
Interest Spread

Mar13

Mar12

Mar11

Mar

--

3.97

3.99

5.01

Adjusted Cash Margin(%)

11.88

11.16

10.54

9.91

07Net Profit Margin

10.96

10.08

9.56

8.48

Return on Long Term Fund(%)

85.08

85.21

85.63

79.93

Return on Net Worth(%)

13.25

11.77

12.65

10.10

Adjusted Return on Net Worth(%)

13.25

11.75

12.05

10.90

Return on Assets Excluding Revaluations

298.73

258.10

208.14

185.04

Return on Assets Including Revaluations

298.73

265.00

216.75

194.05

(http://www.moneycontrol.com/financials/ingvysyabank/ratios/ING)

PROFITABILITY RATIO OF KOTAK MAHINDRA BANK

PROFITABILITY
Mar09

Mar13

Mar12

Mar11

Interest Spread

Mar
8.11

Adjusted Cash Margin(%)

16.22

16.79

18.43

17.76

Net Profit Margin

14.78

15.15

16.46

15.23

Return on Long Term Fund(%)

72.07

66.29

48.25

48.71

Return on Net Worth(%)

14.40

13.65

12.03

12.35

Adjusted Return on Net Worth(%)

14.40

13.65

12.03

12.42

Return on Assets Excluding Revaluations

126.53

107.28

92.23

130.40

Return on Assets Including Revaluations

126.53

107.28

92.23

130.40

(http://www.moneycontrol.com/financials/kotakmahindrabank/ratios/KMB)

PROFITABILITY RATIO OF YES BANK

PROFITABILITY
Mar09

Mar13

Interest Spread

Mar12

Mar11

Mar

4.53

3.60

3.21

Adjusted Cash Margin(%)

14.15

14.25

16.31

17.35

Net Profit Margin

13.61

13.66

15.56

16.30

137.76

131.35

102.46

74.73

Return on Net Worth(%)

22.39

20.89

19.16

15.46

Adjusted Return on Net Worth(%)

22.39

20.92

19.17

15.48

Return on Assets Excluding Revaluations

161.94

132.49

109.29

90.96

Return on Assets Including Revaluations

161.94

132.49

109.29

90.96

Return on Long Term Fund(%)

(http://www.moneycontrol.com/financials/yesbank/ratios/YB)

PROFITABILITY RATIO OF DHANLAXMI BANK

PROFITABILITY
Mar09
Interest Spread

Mar13

Mar12

Mar11

Mar

--

4.20

4.03

3.26

Adjusted Cash Margin(%)

2.36

-5.70

3.93

5.27

Net Profit Margin

0.18

-7.56

2.49

3.73

141.55

141.36

80.56

95.83

Return on Net Worth(%)

0.35

-15.87

3.08

5.29

Adjusted Return on Net Worth(%)

0.35

-16.02

3.02

5.13

Return on Assets Excluding Revaluations

85.82

85.54

99.21

68.64

Return on Assets Including Revaluations

85.82

85.54

99.21

68.64

Return on Long Term Fund(%)

(http://www.moneycontrol.com/financials/dhanlaxmibank/ratios/DB01)

POFITABILITY RATIO OF ICICI BANK

PROFITABILITY
Mar09
Interest Spread

Mar13

Mar12

Mar11

Mar

--

--

--

5.66

Adjusted Cash Margin(%)

17.26

15.85

17.27

13.64

Net Profit Margin

17.19

15.75

15.79

12.17

Return on Long Term Fund(%)

56.37

52.33

43.05

44.72

Return on Net Worth(%)

12.48

10.70

9.35

7.79

Adjusted Return on Net Worth(%)

12.48

10.70

9.35

7.53

Return on Assets Excluding Revaluations

578.21

524.01

478.31

463.01

Return on Assets Including Revaluations

578.21

524.01

478.31

463.01

(http://www.moneycontrol.com/financials/icicibank/ratios/ICI02)

POFITABILITY RATIO OF LAXMI VILAS BANK

PROFITABILITY
Mar09
Interest Spread

Mar13

Mar12

Mar11

Mar

--

4.31

4.96

5.36

Adjusted Cash Margin(%)

5.97

7.83

10.18

4.74

Net Profit Margin

4.67

6.41

8.49

3.04

143.94

144.92

101.50

94.17

Return on Net Worth(%)

9.02

12.17

12.45

4.14

Adjusted Return on Net Worth(%)

9.02

12.17

12.44

4.13

Return on Assets Excluding Revaluations

103.99

90.14

83.23

75.79

Return on Assets Including Revaluations

103.99

98.27

91.51

75.79

Return on Long Term Fund(%)

(http://www.moneycontrol.com/financials/lakshmivilasbank/ratios/LVB)

PART : 2

Literature review
A review of literature on profitability and performance of Indian banks has
thrown ample light on banks' status in the present economic scenario. Narang
et al (2011), Chaudhry (2012), and Uppal et al (2012) and many others have
examined Indian banking system in terms of their performance and
profitability he found that some banks achieved excellent performance with
regard to index of interest earned to total assets ratio.And made an analysis
of the performance of selected public and private banks in India on the basis
of parameters recommended in the CAMEL Model. Researchers have taken

various parameters to evaluate banks' performance such as business per

employee, profit per employee, total deposits, total advances, total
investment, total assets, total income, total expenditure and net profits.also
examined certain key parameters to evaluate the performance of the Indian
banks during the global financial turmoil.

Literature on community bank performance, especially related to efficiency

and bank Strategy continues to expand. The following discussion summarizes
some research in this area over the past decade. Wall (1985) examined small
and medium sized banks from the early 1970s until deregulation occurred in
the early 1980s. He found that profitable banks had lower interest and non
interest expense than less profitable banks. In addition, the more profitable
banks had lower cost of funds, greater use of transactions deposits, more
marketable securities and higher capital levels.

A review of literature studies the relationship between the banking industry

and selected private banks in addition to this it also study the performance of
loans, net profit and NPA. Last decade has witnessed many changes in the
banking industry. In this paper we are trying to throw light on the effect of the
loans and advances on the Indian Economy. Banks mainly make profit from
the difference of interest received and loans paid. Nowadays banks are
performing the number of functions in addition to its two main function lending
and accepting deposits. Banks grant loans in order to satisfy the growing
credit needs of the different sections of the society but since the private banks
are profit making organization thus they have profit making dimension added
to the advances granted by them. In this paper we have focused on the
movement of NPA, Loans, and Net Profit of the private banking industry by
analyzing the data from the year 2007 to 2011. Wherever the data for the
years to the year 2007 could be taken have been taken for analysis.

This paper provides a critical review of the theoretical and empirical basis of
four central areas of financial ratio analysis. The research areas reviewed are

the functional form of the financial ratios, distributional characteristics of

financial ratios, classification of financial ratios, and the estimation of the
internal rate of return from financial statements. It is observed that it is typical
of financial ratio analysis research that there are several unexpectedly distinct
lines with research traditions of their own. A common feature of all the areas
of financial ratio analysis research seems to be that while significant
regularities can be observed, they are not necessarily stable across the
different ratios, industries, and time periods. This leaves much space for the
development of a more robust theoretical basis and for further empirical
research.

The first objective of this study was to determine and evaluate the effects of
bank-specific factors; Capital adequacy, Asset quality, liquidity, operational
cost efficiency and income diversification on the profitability of commercial
banks in Kenya. The second objective was to determine and evaluate the
effects

of

market

structure

factors;

foreign

ownership

and

market

concentration, on the profitability of commercial banks in Kenya. This study

adopted an explanatory approach by using panel data research design to
fulfill the above objectives. Annual financial statements of 38 Kenyan
commercial banks from 2002 to 2008 were obtained from the CBK and
Banking Survey 2009. The data was analyzed using multiple linear
regressions method. The analysis showed that all the bank specific factors
had a statistically significant impact on profitability, while none of the market
factors had a significant impact. Based on the findings the study recommends
policies that would encourage revenue diversification, reduce operational
costs, minimize credit risk and encourage banks to minimize their liquidity
holdings. Further research on factors influencing the liquidity of commercials
banks in the country could add value to the profitability of banks and
academic literature.

A review of the literature brings to the fore insights into the determinants of
NPL across countries. A considered view is that banks lending policy could

have crucial influence on nonperforming loans (Reddy, 2004). He critically

examined various issues pertaining to terms of credit of Indian banks. In this
context, it was viewed that the element of power has no bearing on the illegal
activity. A default is not entirely an irrational decision. Rather a defaulter takes
into account probabilistic assessment of various costs and benefits of his
decision Furthermore, in the context of NPAs on account of priority sector
lending, it was pointed out that the statistics may or may not confirm this.
There may be only a marginal difference in the NPAs of banks lending to
priority sector and the banks lending to private corporate sector. Against this
background, the study suggests that given the deficiencies in these areas, it is
imperative that banks need to be guided by fairness based on economic and
financial decisions rather than system of conventions, if reform has to serve
the meaningful purpose. Experience shows that policies of liberalization,
deregulation and enabling environment of comfortable liquidity at a
reasonable price do not automatically translate themselves into enhanced
credit flow.

A review of literature study the performance of public, private and foreign

banks in India in terms of Profitability in the post reform era. The study is
based on balanced panel data of annual financial statements of banks in India
for the period 1999-2012. The results show that Capital strength, interest
payment, NPA, size negatively affect profitability and are statistically
significant. Liquidity risk has positive and significant relationship with
profitability. Among macro-economic variables, GDP and inflation have
positive relation with ROA. Public ownership is negatively associated with
bank profitability and foreign ownership is positively associated with ROA.

Munyambonera Ezra Francis (2010)

This section explores the empirical literature and the various methods used in
studying commercial banks profitability. In theory, determinants are
categorized

into

three

indicators:

bank-specific, industry-specific and

macroeconomic. Bank specific indicators include: growth in bank assets,

capital adequacy, operational efficiency, and liquidity. The common measure

for industry-specific representative used in the various studies is bankconcentration. While on the other hand, the key macroeconomic variables
include: growth in GDP, GDP-per-capita inflation expectation, interest rate and
its spread. The empirical evidence provides the various methods employed in
studying bank profitability using these determinants. Much of the empirical
literature agrees that bank level as well and macroeconomic factors largely
influence bank profitability. There is however limited evidence that industryspecific factors have any influence on bank profitability. It is against this
background that the study utilized only bank level and macroeconomic factors
to estimate profitability.

BACKGROUND OF THE STUDY

This study will help to analyze the recent norms of NPA.

This study helps to analyze how NPA Causing Problems to Banking Sector
and what might be the solution to overcome from this problem and also its
impact on Profitability of New Profit Banks.

PROBLEM STATEMENT OF STUDY

Profitability is considered as a benchmark for evaluating performance of any
business enterprise including the banking industry.

However, increasing Non-

Performing Assets, have a direct impact on profitability of banks and financial

institutions. Legally speaking banks and financial institutions are not allowed to book
income on such account and at the same times they are forced to make provision on
such assets. So This project is undertaken to now impact of NPA on Profitability of
Private Sector Banks.

OBJECTIVES OF THE STUDY

To analyze the performance comparison of New Private Banks Non

performing asset for past 5 years.
To analyze the impact of NPA on profitability.

RESEARCH METHODOLOGY

 RESEARCH DESIGN :
Research Design of our report is Descriptive and
Analytical Research.
SOURCES OF DATA :
We have used Secondary data source in this report.
DATA COLLECTION METHOD:
Our data collection method in this report is
Judgment Sampling
POPULATIONS:
There are 12 private sector banks analyzed by us.
DATA COLLECTION INSTRUMENTS:
Instruments of data collections are..
1 Google.com
2 www.rbi.org.in
3 Moneycontrol.com
4 Balance sheets

DATA ANALYSIS
AND
INTERPRETATION

To analyze the performance of Private Banks on Non performing

asset for last past 5 years

CITY UNION BANK

YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

6111
3967
4842
540
964

NET NPA [RS.in million]

7000
6000 6111
5000
4000

4842

NET NPA [RS.in

million]

3967

3000
2000
1000
0
2009

540
2010

2011

2012

964
2013

INTERPRETATION:
Above this chart we can say that from year 2009 to 2013 the amount of NPA has
being decreased. So It is good for a bank. And also positive Impact on profitability.

AXIS BANK

YEAR
2009
2010
2011
2012
2013

NET NPA [MILLION]

32713
41900
41035
4726
7041

NET NPA [RS.in million]

45000

41900

40000
35000
30000

41035

32713

NET NPA [RS.in

million]

25000
20000
15000
10000
5000
0
2009

4726
2010

2011

2012

7041
2013

INTERPRETATION:
Above this chart we can say that from year 2009 to 2013 the amount of NPA has
being decreased. So it is positive Impact on profitability of bank.

HDFC BANK
YEAR
2009
0210

NET NPA [MILLION]

62762
39205

2011
2012
2013

29641
3523
4690

NET NPA [RS.in million]

70000
60000

62762

50000
40000

NET NPA [RS.in

million]

39205

30000

29641

20000
10000
0
2009

3523
2010

2011

2012

4690
2013

INTERPRETATION:
Above this chart we can say that from year 2009 to 2013 the amount of NPA has
being decreased. The reason of decreasing NPA of bank we can say that
Proper pre-enquiry of bank for sanctioning a loan to a customer.

INDUSLAND BANK
YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

17913
10183
947
947
1368

NET NPA [RS.in million]

20000
18000 17913
16000
14000
12000
10183
10000
8000
7282
6000
4000
2000
947
0
2009
2010
2011
2012

NET NPA [RS.in

million]

1368
2013

INTERPRETATION:
Above this chart we can say that from year 2009 to 2012 the amount of NPA has
being decreased.And in 2013 NPA amoun has being increased.Here on this table the
reason of increment of NPA is one of the willful defaulter may be said.

SOUTH INDIAN BANK

YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

13431
16157
6002
765
2495

NET NPA [RS.in million]

16000
14000

13431

12000
NET NPA [RS.in
million]

10000
8000
6000

6157

6002

4000
2495

2000
0
2009

765
2010

2011

2012

2013

INTERPRETATION:
Above this table we can say that the highest NPA amount is on year 2011.and less
amount is on 2012.The amount of NPA is going to fluctuate.

KARNATAKA BANK
YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

11610
18861
28034
4352
3778

NET NPA [RS.in million]

30000

28034

25000
20000

NET NPA [RS.in

million]

18861

15000
10000

11610

5000
0
2009

4352
2010

2011

2012

3778
2013

INTERPRETATION:
Above this table we can say that from year 2009 to 2011 has being increased NPA.
And ten NPA has being started to decrease on year 2012 and 2013.Because of
Increasing in Interest rate in loan which has taken by borrower, it can be a reason to
increase NPA, in year 2009 to 2012.

ING VYASYA BANK

YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

20595
22183
9179
525
91

NET NPA [RS.in million]

25000
20000 20595

22183
NET NPA [RS.in
million]

15000
10000

9179

5000
0
2009

2010

2011

525
2012

91
2013

INTERPRETATION:
Above this table we can say that, the less amount of NPA is on year 2013 is 91
Million.

KOTAK MAHINDRA BANK

YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

39684
36025
21116
2374
3114

NET NPA [RS.in million]

45000
40000 39684
35000

36025

30000

NET NPA [RS.in

million]

25000
21116

20000
15000
10000
5000
0
2009

2374
2010

2011

2012

3114
2013

INTERPRETATION:
Above this table we can say that the less amount of NPA is on year 2012 and the
highest amount of NPA is on year 2009.

YES BANK
YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

4116
1299
915
175
70

NET NPA [RS.in million]

4500
4000 4116
3500
3000

NET NPA [RS.in

million]

2500
2000
1500
1000

1299
915

500
0
2009

2010

2011

175
2012

70
2013

INTERPRETATION:
Above this table we can say that the reason of less amount of NPA on 2013 year is
efficient management of bank regarding its policy of loan also.

DHANLAXMI BANK
YEAR
2009
2010
2011
2012
2013

NET NPA [MILLION]

2824
4194
580
580
2610

NET NPA [RS.in million]

4500

4194

4000
3500
3000
2500

2824

2677

2610

NET NPA [RS.in

million]

2000
1500
1000
580

500
0
2009

2010

2011

2012

2013

INTERPRETATION:
Above this table we can say that the less amounts of NPA on year 2011 and 2012
are same and the highest would be on 2010 year.

ICICI BANK
YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

455394
384111
240436
18608
22306

NET NPA [RS.in million]

500000
450000 455394
400000
384111
350000
300000
250000
240436
200000
150000
100000
50000
22306
18608
0
2009
2010
2011
2012
2013

NET NPA [RS.in

million]

INTERPRETATION:
Above this table we can say that the highest amount of NPA on year 2009.The
reason behind that we can say that it may be recession in Economy also and as well
as price rice.

LAXMI VILAS BANK

YEAR
2009
0210
2011
2012
2013

NET NPA [MILLION]

6485
25778
7288
1771
2838

NET NPA [RS.in million]

30000
25778

25000
20000

NET NPA [RS.in

million]

15000
10000
5000

7288

6485

0
2009

1771
2010

2011

2012

2838
2013

INTERPRETATION:
Above this table we can say that, less amount on NPA is on 2012,and the highest
amount is on year 2010.

To analyze the impact of NPA

on profitability.

The p-value for each term tests the null hypothesis that the coefficient is equal to
zero (no effect). A low p-value (< 0.05) indicates that you can reject the null
hypothesis. In other words, a predictor that has a low p-value is likely to be a
meaningful addition to your model because changes in the predictor's value are
related to changes in the response variable.
Conversely, a larger (insignificant) p-value suggests that changes in the predictor are
not associated with changes in the response.
1. Interest spread
Coefficie
nts

Standa
rd
Error

t Stat

Pvalue

Interce
pt
Int
spread

18020.3
23787.68
1
1571.612 4209.97

1.3200
48
0.3733
07

0.1920
05
0.7102
81

Interpretation:
In the output above, we can see that the predictor variables of Interest spread is not
significant because of their p-values are 0.710281. However, the p-value for Interest
Spread (0.710281) is greater than the common alpha level of 0.05, which indicates
that it is not statistically significant.

2 . Adjusted cash margin

Intercept
Adj Cash
margin

Coefficie Standard
nts
Error
12476.31 30131.791
59
6
1335.639 2248.4801
83
87

Interpretation:

t Stat
0.4140
58
0.5940
19

Pvalue
0.6803
59
0.5548
09

In the output above, we can see that the predictor variables of Adjusted Cash
margin is not significant because of their p-values are 0.554809 . However, the pvalue for Adjusted Cash margin (0.554809) is greater than the common alpha level
of 0.05, which indicates that it is not statistically significant.

3. Net profit margin

Coefficie
nts
Intercept
Net pft
margin

18409.96
964.3496
1

Interpretation:

Standard
Error
26962.49
801
2207.510
039

t Stat
0.68279
88
0.43684
95

Pvalue
0.4974
52
0.6638
43

In the output above, we can see that the predictor variables of Net profit margin is
not significant because of their p-values are 0.663843. However, the p-value for Net
profit margin (0.663843) is greater than the common alpha level of 0.05, which
indicates that it is not statistically significant.

4. Return on long term fund

Coefficie
nts
Interce
pt
Ret on
l.t.f

137026.84

Standard
Error
32383.669
19

-1131.541

325.06485
73

t Stat
4.2313
56
3.4809
7

Pvalue
8.37E05
0.0009
56

Interpretation:
In the output above, we can see that the predictor variables of Return on long term
fund is significant because of their p-values are 0.000956. However, the p-value for
Return on long term fund (0.000956) is less than the common alpha level of 0.05,
which indicates that it is statistically significant.

5. Return on net worth

Intercept
Ret on
net worth

Coefficie
nts
64358.13
3
2612.604
5

Standard
Error
24727.23
209
1675.745
178

t Stat
2.6027
23
1.5590
7

Pvalue
0.0117
22
0.1244
2

Interpretation:
In the output above, we can see that the predictor variables of Return on net worth
is not significant because of their p-values are 0.12442. However, the p-value for
Return on net worth (0.12442) is greater than the common alpha level of 0.05, which
indicates that it is not statistically significant.

6. Return on assets revaluation

Coefficients
Intercept

-6866.544335

Standar
d Error

t Stat

P-value

13970.2
6

0.4915
1

0.62492

Ret on
assets
revaluation

195.4748736

55.4634
6

3.5243
9

0.00083
6

Interpretation:
In the output above, we can see that the predictor variables of Return on assets
revaluation is significant because of their p-values are 0.000836. However, the pvalue for Return on assets revaluation (0.000836) is less than the common alpha
level of 0.05, which indicates that it is statistically significant.