SYNOPSIS

TITLE OF THE PROJECT

“NON-PERFORMING ASSETS CHALLENGE TO THE PUBLIC SECTOR
BANKS”

INTRODUCTION
This project report I chosen to study the non-performing assets challenges to the public
sector banks in India. The banking industry has undergone a sea change after the first
phase of economic liberalization in 1991 and hence credit management. While the
primary function of banks is to lend funds as loans to various sectors such as
agriculture, industry, personal loans, housing loans etc., in recent times the banks have
become very cautious in extending loans. The reason being mounting non-performing
assets (NPAs). An NPA is defined as a loan asset, which has ceased to generate any
income for a bank whether in the form of interest or principal repayment. As per the
prudential norms suggested by the Reserve Bank of India (RBI), a bank cannot book
interest on an NPA on accrual basis. In other words, such interests can be booked only
when it has been actually received.

OBJECTIVE OF THE PROJECT

1. To know why NPAs are the great challenge to the Public Sector Banks
2. To understand what is Non Performing Assets and what are the underlying
reasons for the emergence of the NPAs.
3. To understand the impacts of NPAs on the operations of the Public Sector
Banks.
4. To know what steps are being taken by the Indian banking sector to reduce the
NPAs?
5. To evaluate the comparative ratios of the Public Sector Banks with concerned
to the NPAs.

STATEMENT ABOUT THE PROBLEM

The study is conducted to find out the non-performing assets challenges to the public
sector banks in India. The main aim of any person is the utilization money in the best
manner since the India is country were more than half of the population has problem of
running the family in the most efficient manner. However Indian people faced large
number of problem till the development of the full-fledged banking sector. The Indian
banking sector came into the developing nature mostly after the 1991 government
policy. The banking sector has really helped the Indian people to utilise the single
money in the best manner as they want. People now have started investing their money
in the banks and banks also provide good returns on the deposited amount. The people
now have at the most understood that banks provide them good security to their
deposits and so excess amounts are invested in the banks. Thus, banks have helped the
people to achieve their socio economic objectives.
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The banks not only accept the deposits of the people but also provide them credit
facility for their development. Indian banking sector has the nation in developing the
business and service sectors. But recently the banks are facing the problem of credit
risk.
It is found that many general people and business people borrow from the banks but
due to some genuine or other reasons are not able to repay back the amount drawn to
the banks. The amount which is not given back to the banks is known as the non
performing assets. Many banks are facing the problem of nonperforming assets which
hampers the business of the banks. Due to NPAs the income of the banks is reduced
and the banks have to make the large number of the provisions that would curtail the
profit of the banks and due to that the financial performance of the banks would not
show good results.
The main aim behind making this report is to know how Public Sector Banks are
operating their business and how NPAs play its role to the operations of the Public
Sector Banks. The report NPAs are classified according to the sector, industry, and
state wise.
The present study also focuses on the existing system in India to solve the problem of
NPAs and comparative analysis to understand which bank is playing what role with
concerned to NPAs. Thus, the study would help the decision makers to understand the
financial performance and growth of Public Sector Banks as compared to the NPAs.

LITERATURE REVIEW
A synoptic 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. 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’.

There may be only a marginal difference in the NPAs of banks’ lending to priority
sector and the bank’s 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 liberalisation, deregulation and enabling environment of
comfortable liquidity at a reasonable price do not automatically translate themselves
into enhanced credit flow. Although public sector banks have recorded improvements
in profitability, efficiency (in terms of intermediation costs) and asset quality in the
1990s, they continue to have higher interest rate spreads but at the same time earn
lower rates of return, reflecting higher operating costs.
Banks have suffered loan losses through relaxed lending standards, unguaranteed
credits, the influence of the 1980s culture, and the borrowers’ perceptions. It was
suggested that bankers should make a fairly accurate personality-morale profile
assessment of prospective and current borrowers and guarantors.

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RESEARCH METHODOLOGY
The research methodology means the way in which we would complete our prospected
task. Before undertaking any task it becomes very essential for anyone to determine the
problem of study. I will be adopted the following procedure in completing my report
study.
1. Formulating the problem
2. Research design
3. Determining the data sources
4. Analysing the data
5. Interpretation
6. Preparing research report

(1) Formulating the problem

I am interested in the banking sector and I want to make my future in the banking
sector so decided to make my research study on the banking sector. I analysed first the
factors that are important for the banking sector and I came to know that providing
credit facility to the borrower is one of the important factors as far as the banking
sector is concerned. On the basis of the analysed factor, I felt that the important issue
right now as far as the credit facilities are provided by bank is non performing assets. I
started knowing about the basics of the NPAs and decided to study on the NPAs. So, I
choose the topic “Non Performing Assts the great challenge before the Public Sector
Banks”.

(2) Research Design

The research design tells about the mode with which the entire project is prepared. My
research design for this study is basically analytical. Because I have utilised the large
number of data of the Public Sector Banks.

(3) Determining the data source

The data source can be primary or secondary. The primary data are those data which
are used for the first time in the study. However such data take place much time and are
also expensive. Whereas the secondary data are those data which are already available
in the market. These data are easy to search and are not expensive too for my study I
have utilised totally the secondary data.

(4) Analysing the data

The primary data would not be useful until and unless they are well edited and
tabulated. When the person receives the primary data many un-useful data would also
be there. So, I will analysed the data and will be edited them and turned them in the
useful tabulations. So, that can become useful in my report study.

(5) Interpretation of the data

With use of analysed data I shall managed to prepare my project report. But the
analyzing of data would not help the study to reach towards its objectives. The
interpretation of the data is required so that the others can understand the crux of the
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study in more simple way without any problem so I shall be added the chapter of
analysis that would explain others to understand my study in simpler way.

(6) Project writing

This is the last step in preparing the project report. The objective of the report writing
is to report the findings of the study to the concerned authorities.

LIMITATIONS OF THE STUDY

 It may be critical for me to gather the financial data of the every bank of the
Public Sector Banks so the better evaluations of the performance of the banks
may be not possible.
 Since my study is based on the secondary data, the practical operations as
related to the NPAs are adopted by the banks may be not learned.
 Since the Indian banking sector is so wide so it would be not possible for me to
cover all the banks of the Indian banking sector.

REFERENCES

BOOKS:
 Bhatia, U (1988), ‘ Predicting Corporate Sickness in India’, Studies in Banking
& Finance, 7, 57-71.
 Bhattacharya, H (2001), ‘Banking Strategy, Credit Appraisal & Lending
Decisions’, Oxford University Press, New Delhi.
 2. Bloem, A.M., & Goerter, C.N (2001), ‘The Macroeconomic Statistical
Treatment of Non-Performing loans’, Discussion Paper, Statistics Department
of the IMF, Decembere1, 2001.
 M Y Khan and Public Sector Banks K Jain “management Accounting” Tata
McGraw-Hill Publishing Company Limited, New Delhi.
 Banking Finance (February 2013)
 Banking Finance (April 2013)
 IBA Bulletin (January 2013), (February 2013), Monthly journal published by
Indian Banks’ Associations.

WEBSITES
 www.google.com
 www.sbi.co.in
 www.icicibank.com
 www.rbi.org
 www.iba.org
 www.knowledgestom.com

JOURNALS:
 Indian Banking Sector
 Nonperforming assets and banking sectors
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  Impact of NPAs on the working of the Public Sector Banks
 Banking Annuals published by Business Standard.
 Steps taken by govt. to reduce the NPAs of the banks

NEWSPAPER
 Economic times
 Times of India
 The Hindu

MAGAZINES
 Business world
 Business today