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A synopsis on
Objectives:
To study the past trend of NPA.
To evaluate gross and net NPA in different banks.
To analyze the financial performance of banks at different level of NPA.
Evaluate NPA level in different economic situation.
To know the concept of NPA.
To know the reason of NPA.
To know the impact of NPA.
To look at preventive measures.
Summary:
What are Non-Performing Assets (NPA)?
A nonperforming asset (NPA) refers to a classification for loans on the books of
financial institutions that are in default or are in arrears on scheduled payments of
principal or interest. In most cases, debt is classified as nonperforming when loan
payments have not been made for a period of 90 days. While 90 days of nonpayment
is the standard period of time for debt to be categorized as nonperforming, the amount
of elapsed time may be shorter or longer depending on the terms and conditions set
forth in each loan.
Recovering Losses
Lenders generally have four options to recoup some or all of the losses resulting from
nonperforming assets. When companies are struggling to service debt, lenders can
take proactive steps to restructure loans to maintain cash flow and avoid classifying
loans as nonperforming. When defaulted loans are collateralized by assets of
borrowers, lenders can take possession of the collateral and sell it to cover losses to
the extent of its market value.
Lenders can also convert bad loans into equity, which may appreciate to the point of
full recovery of principal lost in the defaulted loan. When bonds are converted to new
equity shares, the value of the original shares is usually wiped out. As a last resort,
banks can sell bad debts at steep discounts to companies that specialize in loan
collections. Lenders typically sell defaulted loans that are not secured with collateral
or when the other means of recovering losses are not cost-effective.
[COMPARATIVE ANALYSIS ON NON-PERFORMING ASSETS OF PRIVATE AND
PUBLIC SECTOR BANKS 3
Methodology
Secondary data will be used, such as:
Data analysis- Raw data collected through surveys, and other sources will be
transformed into meaningful information by organizing it into charts, tabular
form and use of orderly statistical tools (MS-EXCEL).
Type of Research
Performance of NPA for the past ten years will be taken into consideration for both
private and public sector banks.
Descriptive Research
Theoretical Base is prepared in the first stage.
In the second stage trends and historical perceptive of NPA are kept in mind.
Finally, a comparative evaluation is done between public and private sector banks.