ANALYSIS AND INTERPRETATION

Introduction:

For the purpose of analysis and comparison between Public and private sector banks, We
have taken five banks from both sectors to compare the non-performing assets of banks. For
understanding we further bifurcate the non-performing assets in priority sector and non-
priority sector, gross NPA and net NPA in percentage as well as in rupees, deposit –
investment– advances.
Further we also analysis on the basis of Deposit – Investment – Advances to get the clear
view where the bank stands in the competitive market. At the end of March 2008, in private
sector ICICI Bank is the highest deposit-investment-advances figure in rupees crores, second
is HDFC Bank and KOTAK Bank has least figure.
In public sector banks Punjab National Bank has the highest deposit investment-advances but
when we look at the graph we can see that the Bank of Baroda and Bank of India are almost
the similar in numbers and Dena Bank is stands last in public sector bank. When we compare
the private sector banks with public sector banks, we can understand the more number of
people prefer to choose public sector banks for deposit-investment.

4.1 DEPOSIT-INVESTMENT-ADVANCES (RS.CRORE) of both sector banks and

comparison among them, year 2009-10.

Private Sector Banks:-

(Rs in crore )

BANK DEPOSIT INVESTMENT ADVANCES

AXIS 87626 33705 45073
HDFC 100769 49394 64141
ICICI 244431 111454 98993
KOTAK 16424 9142 11971
INDUSIND 19037 6630 11636

TOTAL 468287 210325 231814

Source: RBI database
 500000
450000
400000
350000
300000
250000
DEPOSIT
200000 INVESTMENT
150000 ADVANCES
100000
50000
0
IS I K D L
AX FC IC TA SIN TA
HD IC O U TO
K D
IN

Analysis: From the above figure we can see that the ICICI Bank deposit-investment-
advances are quite high than other banks like HDFC, AXIS, INDUSIND, KOTAK.

4.2 Public Sector Banks:-

BANK DEPOSIT INVESTMENT ADVANCES

BOB 152034 43870 91786
BOI 150012 41803 83368
DENA 33943 10282 18594
PNB 166457 53992 107507
UBI 103859 33823 70085
TOTAL 606305 183770 371340
Source: RBI database
 700000

600000

500000

400000
DEPOSIT
INVESTMENT
300000
ADVANCES

200000

100000

0
BOB BOI DENA PNB UBI TOTAL

Analysis: In public sector Punjab National Bank deposit-investment-advances are

comparatively quite high rather than Bank of Baroda, Bank of India, United bank of India
and Dena Bank.

4.3 COMPARISON BETWEEN ICICI BANK AND PUNJAB NATIONAL BANK

IN TERM OF DEPOSIT-INVESTMENT-ADVANCES:-

BANK DEPOSIT INVESTMENT ADVANCES

ICICI BANK 244431 111454 98993

PNB 166457 53992 107507

Source: RBI database

 250000

200000

150000 DEPOSIT
INVESTMENT
ADVANCES
100000

50000

0
ICICI BANK PNB

Analysis: -Here we have compared between ICICI BANK AND PUNJAB NATIONAL
BANK in term of deposit-investment-advances. From the above figure we can see that ICICI
bank deposit are quite higher than Punjab National Bank. But in case of Investment ICICI
Bank investment amount is double than Punjab National Bank investment amount. However

Advances given by PNB is higher than that of ICICI bank.

4.4 Gross NPA and Net NPA:-

There are two concepts related to non-performing assets a) gross and b) net. Gross refers to
all NPAs on a bank’s balance sheet irrespective of the provisions made. It consists of all the
non-standard assets, viz. Substandard, doubtful, and loss assets. A loan asset is classified as ‘
substandard” if it remains NPA up to a period of 18 months; “ doubtful” if it remains NPA
for more than 18 months; and loss, without any waiting period, where the dues are
considered not collectible or marginally collectible.

Net NPA is gross NPA less provisions. Since in India, bank balance sheets contains a huge
amount of NPAs and the process of recovery and write off of loans is very time consuming,
the provisions the banks have to make against the NPA according to the central bank
guidelines, are quite significant.
Here, we can see that there are huge differences between gross and net NPA. While gross
NPA reflects the quality of the loans made by banks, net NPA shows the actual burden
of banks. The requirements for provisions are:

 100% for loss assets

 100% of the unsecured portion plus 20-50% of the secured portion, depending on the
period for which the account has remained in the doubtful category
 10% general provision on the outstanding balance under the substandard category.

Here, there are gross and net NPA data for 2007-08 and 2008-09 we taken for comparison
among banks. These data are NPA AS PERCENTAGE OF TOTAL ASSETS. As we
discuss earlier that gross NPA reflects the quality of the loans made by banks. Among all the
ten banks Dena Banks has highest gross NPA as a percentage of total assets in the year 2007-
08 and also net NPA. Punjab National Bank shows huge difference between gross and net
NPA. There is an almost same figure between BOI and BOB.

4.5 Gross NPA and Net NPA Of different Public Sector banks in the year 2007-08

BANK GROSS NPA NET NPA

BOB 1.46 0.35

BOI 1.48 0.45
DENA 2.37 1.16
PNB 2.09 0.45
UBI 1.82 0.59
Source: RBI database
 2.5

1.5
GROSS NPA
1 NET NPA

0.5

0
DENA UBI PNB BOI BOB

Analysis: here Dena bank having highest gross NPAs and highest net NPAs in
comparison on other Banks which shows that Dena bank.

4.6 Gross NPA and Net NPA Of different Public Sector banks in the year 2008-09

BANK GROSS NPA NET NPA

BOB 1.10 0.27

BOI 1.08 0.33
DENA 1.48 0.56
PNB 1.67 0.38
UBI 1.34 0.10

Source: RBI database

 1.8
1.6
1.4
1.2
1 GROSS NPA
0.8 NET NPA
0.6
0.4
0.2
0
DENA PNB BOI BOB UBI

Analysis: In 2007-2008 Gross and Net NPAs of DENA Bank is higher in comparison other
banks but in 2008-09 PNB having a highest Gross and Net NPAs.

4.7 Gross NPA and Net NPA Of different Private Sector banks in the year
2007-08

BANK GROSS NPA NET NPA

AXIS 0.57 0.36

HDFC 0.72 0.22
ICICI 1.20 0.58
KOTAK 1.39 1.09
INDUSIND 1.64 1.31
Source: RBI database
 1.8
1.6
1.4
1.2
1 GROSS NPA
0.8 NET NPA
0.6
0.4
0.2
0
INDUSIND KOTAK ICICI AXIS HDFC

Analysis: From the above information its clearly shows that INDUIND Bank having highest
gross and Net NPAs in comparison to other Private Banks.

4.8 Gross NPA and Net NPA Of different Private Sector banks in the year
2008-09

BANK GROSS NPA NET NPA

AXIS 0.45 0.23

HDFC 0.68 0.22
ICICI 1.90 0.87
KOTAK 1.55 0.98
INDUSIND 1.69 1.25

Source: RBI database

 2
1.8
1.6
1.4
1.2
GROSS NPA
1
0.8 NET NPA
0.6
0.4
0.2
0
INDUSIND KOTAK ICICI HDFC AXIS

Analysis: In 2007-08 Gross and Net NPAs of INDUSIND is highest and In 2008-09 Gross
and Net NPAs of ICICI Bank is highest in comparison other bank.

4.9 Comparison of GROSS NPA with Public and Private sectors banks for the year
2007-08

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
I INDU... K BOI BOB UBI PNB

Analysis: Comparison of GROSS NPA with all banks for the year 2007-08.The growing
NPAs affect the health of banks, profitability and efficiency. In the long run, it eats up the
net worth of the banks. We can say that NPA is not a healthy sign for financial institutions.
Here we take all the ten banks gross NPA together for better understanding. Average of these
ten banks gross NPAs is 1.29 as percentage of total assets. So if we compare in private sector
banks AXIS and HDFC Bank are below average of all banks and in public sector BOB and
 BOI. Average of these five private sector banks gross NPA is 1.25 and average of public
sector banks is 1.33.

4.10 COMPARISON OF NET NPA WITH PUBLIC AND PRIVATE SECTORS

BANKS FOR THE YEAR 2007-08

1.4
1.2
1
0.8
0.6
0.4
0.2
0
I INDU... K BOI BOB UBI PNB

Analysis: Comparison of NET NPA with all banks for the year2007-08. Average of these
ten bank’s net NPA is 0.56. And in the public sector banks all these five banks are below
this. But in private sector banks there are three banks are above average. The difference
between private and public banks average is also vast. Private sector banks net NPA average
is 0.71 and in public sector banks it is 0.41 as percentage of total assets. As we know that net
NPA shows actual burden of banks. Indus India bank has highest net NPA figure and HDFC
Bank has lowest in comparison.
 4.11 PRIORITY –NON PRIORITY PRIVATE SECTOR BANKS

BANK AGRI SMALL OTHERS PRIORITY NON-PRIORITY

(1) (2) (3) SECTOR
( 1+2+3 )
AXIS 109.12 14.76 86.71 210.59 275.06
HDFC 36.12 110.56 47.70 194.41 709.23
ICICI 981.85 23.35 354.13 1359.34 6211.12
KOTAK 10.00 33.84 4.04 47.87 405.20
INDUSIND 30.44 3.18 30.02 63.64 328.67
TOTAL 1167.53 185.69 522.60 1875.85 7929.28
Source: RBI database

7000
6000
5000
4000 PRIORITY
3000 NON-PRIORITY
2000
1000
0
AXIS HDFC ICICI KOTAK INDUSIND

Analysis: When we further bifurcate NPA in priority sector and Non priority sector.
Agriculture + small + others are priority sector. In private sector ICICI Bank has the highest
NPA with compare to other private sector banks. Around 72% of NPAs in priority sector and
around 78% in non-priority sector. We can see that in private sector banks have more NPA in
non-priority sector than priority sector.
 4.12 PRIORITY –NON PRIORITY PRIVATE SECTOR BANKS

PRIORITY SECTOR NPA

BANK (ADVANCED RS.CRORE )

BOB 5469 350
BOI 3269 325
DENA 1160 106
PNB 3772 443
UBI 1924 197
Source: RBI database

6000

5000

4000

3000 PRIORITY
NPA
2000

1000

0
BOB BOI DENA PNB UBI

Analysis:

When we talk about public sector banks they are more in priority sector and they give
advanced to weaker sector or industries. Public sector banks give more loans to Agriculture,
small scale and others units and as a result we see that there is more number of NPA in public
sector banks than private sector banks. BOB given more advanced to priority sector in 2008-
09 than other four banks.

4.13 COMPARISON BETWEEN PRIVATE AND PUBLIC BANKS ON NPA

IN BOTH PRIORITY AND NON PRIORITY.
 PUBLIC SECTOR NEW PRIVATE
2007-08 2008-09 2007-08 2008-09
SECTOR
PRIORITY 22954 25287 1468 2080
PUBLIC 490 299 3 0
NON PRT 15158 14163 4800 8339
TOTAL 38602 39749 6271 10419
Source: RBI database

45000

40000

35000

30000

25000 PUBLIC SECTOR

20000 NEW PRIVATE

15000

10000

5000

0
SECTOR PRIORITY PUBLIC NON PRT TOTAL

Analysis:
But when there are comparison between private bank and public sector bank still ICICI Bank
has more NPA in both priority and non-priority sector with the comparison of public sector
banks. Large NPA in ICICI Bank because the strategy of bank that risk-reward attitude and
initiative in each sector. Above we also discuss that ICICI Bank has highest deposit-
investment-advance than other banks.

Now, when we compare the all public sector and private sector banks on priority and non-
priority sector the figures are really shocking. Because in compare of private sector banks,
public sector banks numbers are very large.

Here, there are huge differences between private and public sector banks NPA. There is
increase in new private sector banks NPA of Rs.4148 cr in 2008-09 which is almost 66% rise
than previous year. In public sector banks the numbers are not increased like private sector
banks.

ANALYSIS OF TREND AND ASSET QUALITY OF GROSS ADVANCES

AND GROSS NON PERFORMING ASSETS:

The study first of all examined the trend of gross advances, gross NPAs, ratio of gross NPAs
to Gross Advances, and ratio of gross NPAs to total assets. It is apparent from table 1 that
gross advances of the banks have shown a rising trend since 2003-04. Gross advances of the
public sector banks in absolute term have increased from Rs 577813 crore in 2002-03 to Rs
2283473 crore in 2008-09. There is sharp increase of 295.19 percent in gross advances of the
public sector banks during the study period. The gross NPAs of the banks in absolute terms
amounted to Rs 54090 crore in 2002-03, and Rs 51538 crore, Rs 48399 crore, Rs 41358
crore, Rs 38968 crore, Rs 40597 crore and Rs 45156 crore for the years 2002-03, 2003-04,
2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 respectively. The gross NPAs in absolute
terms have decreased by 16.5 percent in the year 2008-09 over 2002-03. An in-depth analysis
into gross NPAs shows that the gross NPAs of the public sector banks have declined up to the
year 2006-07, and increased in the last two years of study i.e. 2007-08, and 2008-09. The
study observed that the gross NPAs of public sector banks have depicted a mixed trend over
the period of study. It is found on the basis of analysis of data that the asset quality of public
sector banks improved consistently in the past few years as reflected in the decline in the two
ratios i.e. gross NPAs as percentage of gross advances, and gross NPAs as percentage of total
assets.

TABLE 1

GROSS NPAS OF PUBLIC SECTOR BANKS

 Net Net NPAS
Years Advances GROSS NPAS
Gross Amount Per cent to Per cent to
YEARS Per cent to
(Cr)Cr.)
Advances( (Cr) ( Cr.)
Amount Net Advances TotalPer cent to
Assets
Gross Advances Total Assets
2002-03 549351 24877 4.5 1.9
2002-03 577813 54090 9.4 4.2
2003-04 631383 19335 3.1 1.3
2003-04 66975 51538 7.8 3.5
2004-05 848912 16904 2.0 1.0
2004-05 877825 48399 5.5 2.7
2005-06 1106288 14566 1.3 0.7
2005-06 1134724 41358 3.6 2.1
2006-07 1440146 15146 1.1 0.6
2006-07 1464493 38968 2.7 1.6
2007-08
Source: 1797504
Trends & progress of banking17839 1.0
in India, RBI Publication 0.6
2007-08 1819074 40597 2.2 1.3
2008-09 2260156 21033 0.9 0.6
ANALYSIS
2008-09 OF TREND AND ASSET QUALITY
2283473 45156 OF NET ADVANCES
2 AND 1.2
NET NON PERFORMING ASSETS:
The study then investigated net advances, net NPAs, ratio of net NPAs to net Advances, and
ratio of net NPAs to total assets (Table 2). The study found that the net advances of the public
sector banks have increased in absolute term have increased by 311.42 percent in 2008-09
over 2002-03. Over the period of study, Net NPAs in absolute term have registered a decline
of 15.45 percent. The study observed a mix trend in net NPAs of public sector banks over the
period of study. It found that Net NPAs have decreased during the period of 2002-02 to 2005-
06, thereafter, it has shown an increasing trend. It is observed that despite increase in gross
nonperforming assets (NPAs) in absolute terms during the year, asset quality of public sector
banks improved in the past few years as reflected in the decline in these two ratios i.e. net
NPAs as percentage of net advances, and net NPAs as percentage of total assets. Hence, it
can be stated that as a whole there is improvement in the asset quality of public sector banks.

Classification of Loan Assets (Amount in Rs. Crore)

YEARS Sub-standard Assets TABLE 2
Doubtful Assets Loss Assets
Amount
NET %age*
ADVANCES Amount
AND NET NPAS %age* SECTOR
OF PUBLIC Amount %age*
BANKS
2005-06 11453 1.0 25028 2.2 5636 0.5
2006-07 14275 1.0 19873 1.4 4826 0.3
2007-08 17298 1.0 19291 1.1 4018 0.2
2008-09 20603 0.9 21019 0.9 4296 0.2
Source: Trends & progress of banking in India, RBI Publication

ANALYSIS OF NPAs ON THE BASIS OF CLASSIFICATION OF LOAN ASSETS:

Loan assets of banks can be classified into three categories i.e. sub-standard assets,doubtful
assets, and loss assets (Table 3).

TABLE 3

CLASSIFICATION OF LOAN ASSETS OF NPAS OF PUBLIC SECTOR BANKS

Classification of Loan Assets (Amount in Rs. Crore)

YEARS Sub-standard Assets Doubtful Assets Loss Assets
Amount %age* Amount %age* Amount %age*
Table3: Loan asset as a percentage of total gross non- performing assets
2002-03 14909 2.6 32340 5.6 6840 1.2
2003-04 16909 2.5 28756 4.4 5876 0.9
Analysis
2004-05of loan assets
11068 depicted that
1.3 the substandard
30779 assets has
3.5 shown a5929
decline to 0.9
0.7percent
in 2008-09 from 2.6 percent in 2002-03. The doubtful assets have declined to 0.9 percent
from 5.6 percent during the same period. The Loss assets have declined to 0.2 percent in
2008-09 from 1.2 percent in 2002-03. The decline in various categories of loan assets
indicates recovering health of public sector banks. All the three categories of NPAs as a
percentage of gross non- performing assets have registered a decline over the period of study.

ANALYSIS OF NPAs ON THE BASIS OF SECTOR WISE ANALYSIS:

Sector wise the NPAs have been classified into three sectors i.e. priority sector, public sector
and non priority sector as depicted in table 4.

TABLE 4: SECTOR-WISE CLASSIFICATION OF NPAS OF PUBLIC SECTOR BANKS

(AMOUNT IN CRORES)

PRIORITY SECTOR
Non Priority Total
YEARS Agriculture Public Sector
Sector
Amount %age Amount %age Amount %age Amount %age
2002-03 24937 47.23 1085 2.05 26783 50.72 52806 100
2003-04 23840 47.54 610 1.22 25698 51.24 50148 100
2004-05 23397 49.05 450 0.95 23849 50 47696 100
Source: Trends & progress of banking in India, RBI Publication
2005-06 22374 54.07 340 0.82 18664 45.11 41378 100
2006-07
Sector 22954 indicates
wise analysis 59.46 that non
490priority 1.27
sector has15158 39.27 for 38602
highest NPAs the period 100
2002-
03 2007-08
to 2004-05,25287
whereas65.26 299
for remaining period0.77 13163
of the study 33.97
agriculture 38749
sector has 100
highest
2008-09 24318 55.21 474 1.08 19250 43.71 44042 100
percentage of NPAs. The NPAs of the agriculture sector has increased to 55.21 percent in
2008-09 from 47.23 percent in 2002-03. The public sector banks have managed to reduce
NPAs in the non priority sector. In this sector, the NPAs have reduced to 43.41 percent in
2008-09 from 50.52 percent in 2002-03. In the priority sector also, the NPAs have reduced to
1.08 percent in 2008-09 from 2.05 percent in 2002-03.