A

Comprehensive Project report On A Study on Credit Risk Analysis of Commercial Bank in India

Project Report Submitted in Partial Fulfillment for the degree of MBA Degree
Submitted To

S. K. Patel Institute of Management and Computer Studies (A Constituent of Kadi Sarva Vishwavidhyalaya University) Gandhinagar, India

Submitted By Jalpesh Malani

(45)

Project Guide Prof. Sandhya Harkawat

Flow of presentation
Introduction to banking industry Literature review

Research methodology
Specification of the model Data analysis and interpretation

Finding
Conclusion Reference

INTRODUCTION TO BANKING INDUSTRY

Banks play an active role in the economic development of a country.

Their ability to make a positive contribution in igniting the process of growth depends on the effective banking system. These banks mostly deal with money collected in the form of deposits along with their own funds in the form of share capital and resources constituting around 5% of the total resources of the banks. So the banks have the obligation of meeting the demand of the customers promptly, interest for the amount and meeting the expenses to carry out its activities. This necessitates the banks to maintain adequate liquidity and earn required profit from their activities. Maintenance of liquidity and profitability are contradictory in nature. (Therefore, the banks have to perform the difficult task of maintaining equilibrium between liquidity and profitability). The maintenance of liquidity is necessary to prove the fact that the bank is able to meet its commitments without fail and is paying the day to day expenses. Thus, liquidity refers to the ability of the concern to fulfill its obligation promptly. Whereas, profitability is primarily the measure of the overall success of business and so, it is the ability to earn profit

Literature Review
(1)
TITLE :-

Credit risk and commercial banks performance in nigeria: a panel model approach
CONCLUSION AND RECOMMENDATIONS The following conclusions are made from the panel data regression analysis of the effect of credit risk on bank performance measured by return on equity. The effect of credit risk on bank performance measured by the Return on Assets of banks . That is, nature and managerial pattern of individual firms do not determine the impact. Loan and Advances ratio (LA) coefficient exerts most significant positive effect on the profitability across the banking firms. Based on our findings, it is recommended that banks in Nigeria should enhance their capacity in credit analysis and loan administration while the regulatory authority should pay more attention to banks compliance to relevant provisions of the Bank and other Financial Institutions Act (1999) and prudential guidelines.

(2)
TITLE :-

The impact of credit risk management on financial performance of commercial banks in Nepal
CONCLUSI ON AND RECOMMENDATIONS : Credit risk management contributes up to 22.6% of the bank performance. In order to reduce risk on loans and achieve maximum performance the banks need to allocate more funds to default rate management. Based on the study other factors not studied in this research has a very significant contribution of 77.4% to bank performance.

(3)
TITLE :-

Credit risk management and profitability ofcommercial banks in kenya

CONCLUSI ON AND RECOMMENDATIONS : The findings reveal that the bulk of the profits of commercial banks is not

influenced by the amount of credit and nonperforming loans suggesting that other variables other than credit and nonperforming loans impact on profits. Commercial banks that are keen on making high profits should concentrate on other factors other than focusing more on amount of credit and nonperforming loans.

RESEARCH PROPOSAL
Objective of Study:

The main objectives of the study are as follows: To analyse NPA, provision & other liability, classified asset, deposit, loan & advance affect on ROA. To study credit risk management affect on bank performance.
Scope of Study: Credit risk analyses on the basis of ten commercial banks were selected

over the period of 5 years (2008-2012).

Research methodology
Research Design:

A research design is framework or blueprint for conducting the research study. Descriptive Research Design has been adopted a study on credit risk analysis of commercial bank in India.
Sampling Plan: No. of Branches Range 1000-2000 Sample size: 5 Nationalize Bank Andhra bank Corporation bank

Dena bank
Indian bank Panjab & sind bank

5 Private Bank Axis bank Federal bank Icici bank Hdfc bank South Indian bank

Data Collection and Analysis Sources

Secondary data:

The secondary sources include literature review from various journals, magazines and websites, government publication, research reports and survey reports.
Data Analysis: Microsoft Excel, Microsoft Word and Eviews have been used to analyze and interpret the data. Limitations: Different bank are different rule and policy for credit risk management.

Knowledge and skill of credit risk manager about the analytical part of different bank.

SPECIFICATION OF THE MODEL

The model adopted for this study is Credit Risk and the Performance of indian Banks which measured profitability with Return on Asset (ROA) as a function of the ratio of Non-performing asset to loan & Advances (NPA/LA) and ratio of Total loan & Advances to Total deposit (LA/TD) used as indicators of credit risk. However, the study improved on the model by incorporating the ratio of provision & other liability to classified assets (POL/CA) as a measure for credit risk. The model for this study functionally becomes; ROA= f (NPA/LA, POL/CL, LA/TD)............ (1) Where;

ROA: Return on Assets NPA: Non-Performing asset LA: Loan and Advances POL: Provision & other liability CL: Classified Loan TD: Total Deposit

The econometric equation for the model is specified as Estimation Command: ========================= LS ROA P___OL_CA NPA_LA LA_TD C Estimation Equation: ========================= ROA=C(1)*P___OL_CA+C(2)*NPA_LA+C(3)*LA_TD+C(4)+.(2) Where; C(4) = Constant parameter/Intercept = Error term The a priori expectation in the model is that all the independent variables are expected to have a negative relationship on bank performance measured by Return on Assets (ROA) except loans and advances which is expected to have a positive relationship with bank performance. The study uses panel data regression model in the analysis. The technique of panel data estimation takes care of the problem of heterogeneity in the 10 Banks selected for the study.

List of test for Analysis

F-stastitic
T-stastitic R-square

Adjusted R2
Skewness Kurtosis Jarque-bera Test

Hypothesis

F-Statistic: H0=There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA. H1=There is an impact of POL_CA, NPA_LA and LA_TD on ROA.
T-Statistic: H0=There isnt having significant impact on ROA. H1=There is having significant impact on ROA. Jarque-Bera statistics : H0= There is normal distribution follow H1= There isnt normal distribution follow

Table 1 (Nationalize bank)

Dependent Variable: ROA Method: Least Squares Date: 03/13/13 Time: 22:00 Sample: 1 25 Included observations: 25

F-Statistic:There is an impact of POL_CA, NPA_LA and LA_TD on ROA.

t-Statistic Prob.

Variable

Coefficient Std. Error

T-Statistic:T-Statistic value of NPA_LA and LA_TD are significant impact on ROA. T-Statistic value of POL_CA 0.8258 isnt having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted R-square respectively 61.68% and 56.21%. It is show goodness of fit of a model.

P___OL_CA NPA_LA LA_TD C

0.006768 -22.98643 -1.362737 2.252271

0.030374 7.702523 0.339742 0.313467

0.222820 -2.984273 -4.011092 7.185022

0.8258 0.0071 0.0006 0.0000

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic
Prob(F-statistic)

0.616876 0.562144 0.164234 0.566432 11.86747 11.27086

0.000129

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.227600 0.248198 -0.629398 -0.434378 -0.575307 0.874625

Graph 2
7 6 5 4 3 2 1 0 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3

Series: Residuals Sample 1 25 Observations 25 Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis 1.45e-16 -0.004304 0.313198 -0.343900 0.153627 -0.186736 3.073137

Kurtosis value 3.0731 is more than 3 so it is follow Leptokurtic distribution. Skewness value -0.1867 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.9273 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Jarque-Bera 0.150864 Probability 0.927343

Table 2 (Privatize bank)

Dependent Variable: ROA Method: Least Squares Date: 03/15/13 Time: 09:21 Sample: 26 50 Included observations: 25

F-Statistic:There is an impact of POL_CA, NPA_LA and LA_TD on ROA.

Coefficient Std. Error t-Statistic Prob.

Variable

T-Statistic:There is having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 51.43% and 44.49%. It is show goodness of fit of a model.

P___OL_CA NPA_LA LA_TD C

0.025604 -27.87906 1.211047 0.490307

0.011994 9.574708 0.458587 0.326000

2.134668 -2.911740 2.640820 1.504011

0.0447 0.0083 0.0153 0.1475

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic
Prob(F-statistic)

0.514337 0.444956 0.175693 0.648232 10.18132 7.413283

0.001436

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.331600 0.235826 -0.494505 -0.299485 -0.440415 1.287239

Graph 3
6

Series: Residuals Sample 26 50 Observations 25 Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis 3.29e-16 0.008635 0.288219 -0.278539 0.164346 -0.095849 2.192210

Kurtosis value 2.1922 is less than 3 so it is follow Platykurtic distribution. Skewness value -0.0958 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.7179 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Jarque-Bera 0.717993 Probability 0.698377

-0.3 -0.2 -0.1 0.0 0.1 0.2 0.3

Table 3 (Andhra bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:26 Sample: 1 5 Included observations: 5

F-Statistic:There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA.

Std. Error t-Statistic Prob.

Variable

Coefficient

T-Statistic:There isnt having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 87.10% and 48.40%. It is show goodness of fit of a model.

P___OL_CA NPA_LA LA_TD C

-0.480799 -48.58616 -7.291082 7.949504

0.194110 27.86325 4.098806 3.459134

-2.476937 -1.743736 -1.778831 2.298120

0.2443 0.3315 0.3260 0.2613

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.871001 0.484005 0.093851 0.008808 8.759128 2.250670 0.447270

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.238000 0.130652 -1.903651 -2.216101 -2.742235 2.485721

Graph 4
3

Series: Residuals Sample 1 5 Observations 5

2

Kurtosis value 2.1185 is less than 3 so it is follow Platykurtic distribution. Skewness value 0.5944 is indicating positive value so right tail is longer than left tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.7959 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis

-7.13e-16 0.001797 0.071724 -0.044685 0.046926 0.594485 2.118582

Jarque-Bera 0.456364 Probability 0.795979

0 -0.050 -0.025 0.000 0.025 0.050 0.075

Table 4 (Corporation bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:29 Sample: 6 10 Included observations: 5

F-Statistic:there isnt an impact of POL_CA, NPA_LA and LA_TD on ROA.

Std. Error t-Statistic Prob.

Variable

Coefficient

T-Statistic:There isnt having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 98.89% and 95.57%. It is show goodness of fit of a model.

P___OL_CA NPA_LA LA_TD C

0.067827 -27.23535 0.885957 0.455735

0.018957 9.582599 0.474685 0.355468

3.577933 -2.842168 1.866409 1.282068

0.1735 0.2154 0.3131 0.4217

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.988931 0.955723 0.024915 0.000621 15.39029 29.78001 0.133711

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.242000 0.118406 -4.556118 -4.868567 -5.394702 2.539367

Graph 5
2

Series: Residuals Sample 6 10 Observations 5 Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis 1.55e-16 0.001886 0.011586 -0.020717 0.012458 -1.002652 2.661564

Kurtosis value 2.6615 is less than 3 so it is follow Platykurtic distribution. Skewness value -1.0026 is indicating negative so left tail is longe. Jarque-Bera statistics :Prob (Jarque-Bera) 0.6499 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Jarque-Bera 0.861621 Probability 0.649982

0 -0.025 -0.020 -0.015 -0.010 -0.005 0.000 0.005 0.010 0.015

Table 5 (Dena bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:30 Sample: 11 15 Included observations: 5

F-Statistic:There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA.

Variable

Coefficient

Std. Error

t-Statistic

Prob.

T-Statistic:There isnt having significant impact on ROA. R-Squared and Adjusted R-Square :Values of R-square and adjusted R-square are respectively 99.13% and 96.52%. It is show goodness of fit of a model.

P___OL_CA NPA_LA LA_TD C

0.002869 -22.56564 0.671486 0.809414

0.005112 3.225331 0.139800 0.116375

0.561209 -6.996382 4.803184 6.955193

0.6744 0.0904 0.1307 0.0909

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.991323 0.965291 0.006400 4.10E-05 22.18637 38.08094 0.118433

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.034000 0.034351 -7.274549 -7.586998 -8.113133 2.710001

Graph 6
3

Series: Residuals Sample 11 15 Observations 5

2

Kurtosis value 1.6776 is less than 3 so it is follow Platykurtic distribution. Skewness value -0.4332 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.7707 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis

3.11e-16 0.001120 0.003337 -0.004474 0.003200 -0.433283 1.677698

Jarque-Bera 0.520712 Probability 0.770777

0 -0.0050 -0.0025 0.0000 0.0025 0.0050

Table 6 (Panjab and sind bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:33 Sample: 16 20 Included observations: 5

F-Statistic:There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA.

Std. Error t-Statistic Prob.

Variable

Coefficient

T-Statistic:T-Statistic value of POL_CA and LA_TD arent having significant impact on ROA.
T-Statistic value of NAP_LA 0.0391 is having significant impact on ROA.

P___OL_CA NPA_LA LA_TD C

-0.229284 -113.4653 4.966577 -1.269806

0.040396 6.981361 0.722730 0.534331

-5.675926 -16.25260 6.871970 -2.376440

0.1110 0.0391 0.0920 0.2536

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.996521 0.986082 0.038146 0.001455 13.26058 95.46689 0.075061

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.070000 0.323342 -3.704234 -4.016683 -4.542818 2.907431

R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 99.65% and 98.60%. It is show goodness of fit of a model.

Graph 6
3

Series: Residuals Sample 16 20 Observations 5

2

Kurtosis value 2.5361 is less than 3 so it is follow Platykurtic distribution. Skewness value -0.9675 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.6620 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis

4.44e-16 0.007054 0.017584 -0.031345 0.019073 -0.967523 2.536137

Jarque-Bera 0.824911 Probability 0.662023

0 -0.04 -0.03 -0.02 -0.01 0.00 0.01 0.02

Table 7 (Inidan bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:34 Sample: 21 25 Included observations: 5

F-Statistic:There is an impact of POL_CA, NPA_LA and LA_TD on ROA.

Variable

Coefficient

Std. Error

t-Statistic

Prob.

P___OL_CA NPA_LA LA_TD C

0.000131 -15.76195 -1.303465 2.233416

0.001687 0.280316 0.115804 0.051734

0.077598 -56.22921 -11.25579 43.17147

0.9507 0.0113 0.0564 0.0147

T-Statistic:T-Statistic value of POL_CA and LA_TD arent having significant impact on ROA. T-Statistic value of NPA_LA 0.0113 is having significant impact on ROA.

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.999778 0.999113 0.004349 1.89E-05 24.11808 1503.409 0.018956

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.554000 0.146048 -8.047232 -8.359681 -8.885816 1.214087

R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 99.97% and 99.91%. It is show goodness of fit of a model.

Graph 8
2

Series: Residuals Sample 21 25 Observations 5 Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis -8.88e-17 0.000670 0.002098 -0.003581 0.002174 -0.955342 2.591518

Kurtosis value 2.5915 is less than 3 so it is follow Platykurtic distribution. Skewness value -0.9553 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.6718 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Jarque-Bera 0.795327 Probability 0.671888

0 -0.004 -0.003 -0.002 -0.001 0.000 0.001 0.002 0.003

Table 8 (Axis bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:36 Sample: 26 30 Included observations: 5

F-Statistic:There is an impact of POL_CA, NPA_LA and LA_TD on ROA.

Variable

Coefficient

Std. Error

t-Statistic

Prob.

P___OL_CA NPA_LA LA_TD C

-0.097961 79.64169 2.259195 0.100293

0.003395 5.924780 0.178266 0.157280

-28.85624 13.44214 12.67318 0.637674

0.0221 0.0473 0.0501 0.6386

T-Statistic:T-Statistic value of POL_CA and NPA_LA are having significant impact on ROA. T-Statistic value of LA_TD 0.0501 isnt having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 99.98% and 99.95%. It is show goodness of fit of a model.

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.999891 0.999565 0.004120 1.70E-05 24.38837 3064.627 0.013278

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.542000 0.197535 -8.155349 -8.467799 -8.993933 2.601862

Graph 9
2

Series: Residuals Sample 26 30 Observations 5 Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis -5.00e-17 -0.000776 0.002515 -0.002179 0.002060 0.273248 1.353077

Kurtosis value 1.3530 is less than 3 so it is follow Platykurtic distribution. Skewness value 0.2732 is indicating positve so right tail is longer. Jarque-Bera statistics :Prob (Jarque-Bera) 0.7307 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Jarque-Bera 0.627294 Probability 0.730777

0 -0.003 -0.002 -0.001 0.000 0.001 0.002 0.003

Table 9 (Federal bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:37 Sample: 31 35 Included observations: 5

F-Statistic:There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA. T-Statistic:T-Statistic value of NPA_LA,POL_CA and LA_TD arent having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 25.84% and -1.96%. There isnt goodness of fit of a model.

Variable

Coefficient

Std. Error

t-Statistic

Prob.

P___OL_CA NPA_LA LA_TD C

-0.190073 -86.63332 -0.041747 1.992876

0.506090 248.9678 6.814997 3.895569

-0.375571 -0.347970 -0.006126 0.511575

0.7713 0.7868 0.9961 0.6990

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.258467 -1.966131 0.211843 0.044878 4.688446 0.116186 0.939184

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.344000 0.123004 -0.275378 -0.587828 -1.113962 2.249833

Graph 10
4

Series: Residuals Sample 31 35 Observations 5

3

Kurtosis value 3.0008 is more than 3 so it is follow Leptokurtic distribution. Skewness value -1.2849 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.5026 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis

-3.11e-16 0.028013 0.085387 -0.184098 0.105922 -1.284922 3.000838

Jarque-Bera 1.375854 Probability 0.502617

0 -0.20 -0.15 -0.10 -0.05 0.00 0.05 0.10

Table 10 (HDFC bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:38 Sample: 36 40 Included observations: 5

F-Statistic:There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA.

Variable

Coefficient

Std. Error

t-Statistic

Prob.

P___OL_CA NPA_LA LA_TD C

0.008513 -51.64987 1.047631 0.849298

0.027814 52.15116 1.614253 1.155045

0.306076 -0.990388 0.648988 0.735294

0.8109 0.5031 0.6335 0.5964

T-Statistic:T-Statistic value of NPA_LA,POL_CA and LA_TD arent having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 92.61% and 70.44%. It is show goodness of fit of a model.

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.926114 0.704456 0.109040 0.011890 8.009105 4.178127 0.341781

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.496000 0.200574 -1.603642 -1.916092 -2.442226 2.587998

Graph 11
3

Series: Residuals Sample 36 40 Observations 5

2

Kurtosis value 2.3295 is less than 3 so it is follow Platykurtic distribution. Skewness value -0.2822 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.9231 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis

-3.14e-16 0.003022 0.070256 -0.080187 0.054520 -0.282208 2.329575

Jarque-Bera 0.160008 Probability 0.923113

0 -0.100 -0.075 -0.050 -0.025 0.000 0.025 0.050 0.075

Table 11 (ICICI bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:39 Sample: 41 45 Included observations: 5

F-Statistic:There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA.

Std. Error t-Statistic Prob.

Variable

Coefficient

P___OL_CA NPA_LA LA_TD C

-1.384938 -31.47471 -0.485706 2.335777

0.633236 5.164421 0.713503 0.732337

-2.187082 -6.094527 -0.680735 3.189486

0.2730 0.1035 0.6195 0.1934

T-Statistic:T-Statistic value of NPA_LA, POL_CA and LA_TD arent having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 98.06% and 92.24%. It is show goodness of fit of a model.

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.980613 0.922452 0.057287 0.003282 11.22728 16.86027 0.176708

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.208000 0.205718 -2.890912 -3.203361 -3.729496 3.026970

Graph 12
3

Series: Residuals Sample 41 45 Observations 5

2

Kurtosis value 2.1691 is less than 3 so it is follow Platykurtic distribution. Skewness value -0.4450 is indicating negative so left tail is longer than right tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.8569 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis

1.76e-16 -0.003861 0.032977 -0.042896 0.028644 -0.445028 2.169142

Jarque-Bera 0.308859 Probability 0.856904

0 -0.050 -0.025 0.000 0.025 0.050

Table 12 (South Indian bank)

Dependent Variable: ROA Method: Least Squares Date: 03/14/13 Time: 01:40 Sample: 46 50 Included observations: 5

F-Statistic:There isnt an impact of POL_CA, NPA_LA and LA_TD on ROA. T-Statistic:There isnt having significant impact on ROA. R-Squared and Adjusted R-Square :There are values of R-square and Adjusted Rsquare respectively 81.36% and 25.47%. It is show goodness of fit of a model.

Variable

Coefficient

Std. Error

t-Statistic

Prob.

P___OL_CA NPA_LA LA_TD C

0.029617 15.65977 1.263637 0.046709

0.050877 9.105355 0.801956 0.546066

0.582129 1.719842 1.575694 0.085538

0.6644 0.3353 0.3600 0.9457

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic)

0.813689 0.254756 0.035803 0.001282 13.57759 1.455790 0.532001

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

1.068000 0.041473 -3.831035 -4.143485 -4.669619 1.876636

Graph 13
4

Series: Residuals Sample 46 50 Observations 5

3

Kurtosis value 2.6044 is less than 3 so it is follow Platykurtic distribution. Skewness value 0.6636 is indicating positive so right tail is longer than left tail. Jarque-Bera statistics :Prob (Jarque-Bera) 0.8188 is more than significant 0.05 level So H0 is accepted and follows normal distribution.

Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis

-1.50e-16 -0.002462 0.028479 -0.021084 0.017901 0.663659 2.604448

Jarque-Bera 0.399632 Probability 0.818881

0 -0.03 -0.02 -0.01 0.00 0.01 0.02 0.03

Finding
Ratio of NPA_LA, LA_TD is significant impact on ROA in 5 selected nationalize

banks where Ratio of POL_CA isnt significant impact on ROA and overall independent variable are impact on dependent variable.
Jarque bera statistics shows normal distribution in nationalize bank and kurtosis value indicate leptokurtic distribution. Value of R-square is good in both private bank and national bank but value of Rsquare is more in nationalize bank compare to private bank. T-test and F-test indicates individual and overall independent significant impact on ROA in private bank. Jarque-Bera test indicates normal distribution in private banks.

 Kurtosis value indicates platykurtic distribution and skewsness value shows

left tail longer than right tail in private bank.

Ratio of POL_CL, NPA_LA and LA_TD are affected on ROA in Indian

bank and axis bank.

Only Federal bank out of 10 banks is followed leptokurtic distribution and

skewness is indicate right tail longer than left tail in Andhra bank, axis bank and south Indian bank.

Conclusion
The following conclusions are made from the panel data regression analysis of the effect of credit risk on bank performance measured by return on asset. Ratio of NPA_LA and LA_TD are significant impact on ROA except POL_CA in nationalize bank and Ratio of POL_CA, NPA_LA, LA_TD are significant impact on ROA in private bank so overall independent variable are affected on dependent variable. Jarque-Bera test is indicating normal distribution in both private bank and nationalize bank. Indian bank and axis bank out of 10 banks are affected POL_CL, NPA_LA and LA_TD on ROA so credit risk management arent affected bank performance. Based on our findings, it is recommended that banks in India should enhance their capacity in credit analysis and loan administration while the regulatory authority should pay more attention to banks compliance to relevant provisions of the Bank and other Financial Institutions Act and prudential guidelines.

Reference

Web site http://andhrabank.in/english/BS2010.aspx www.corpbank.com/uploadedfiles/custom/Final-Corp-AR2012_F2.pdf http://www.denabank.com/viewsection.jsp?lang=0&id=0,2,17,451 http://www.indian-bank.com/annual_report.php https://www.psbindia.com/BS2011-12H.pdf www.axisbank.com/.../Annual-Report-AxisSalesandSecuritiesLtd.pdf http://www.federalbank.co.in/financial-result? www.hdfcbank.com/aboutus/cg/annual_reports.htm http://www.southindianbank.com/content/viewContentLvl1.aspx?linkIdLvl2=5&LinkIdLvl3=566&linkId=566 http://www.icicibank.com/aboutus/annual.html http://dbie.rbi.org.in/DBIE/dbie.rbi?site=statistics http://www.rbi.org.in/scripts/publications.aspx?publication=Annual http://www.scribd.com/doc/35847069/Comparative-Study-of-the-Public-Sector-amp-Private-Sector-Bank http://kannanpersonal.com/inbank2/banking-vision/economic-scene.html http://www.investopedia.com/terms/c/coefficient-of-determination.asp#ixzz2NnnvIsG5 http://www.investopedia.com/terms/t/t-test.asp#ixzz2NnXq3I4G http://en.wikipedia.org/wiki/Coefficient_of_determination http://www.mathworks.in/help/stats/jbtest.html http://www.tc3.edu/instruct/sbrown/stat/shape.htm Web site for literature review http://www.ijac.org.uk/images/frontImages/gallery/Vol._1_No._5/2.pdf. http://www.ajbmr.com/articlepdf/aus_20_70i2n2a4.pdf http://www.studymode.com/subjects/credit-risk-management-and-profitability-of-commercial-banks-in-kenyapage1.html