Impact of Micro Factors in Credit Appraisal on Non-Performing Assets: Evidence from Selected Indian Banks

The asset quality of banks is one of the most important indicators of their financial health. It also reflects the effectiveness of banks’ credit risk management and the recovery environment. It is important that the signs of distress in all stressed accounts are detected early and those which are viable are also extended restructuring facilities expeditiously to preserve their economic value. (RBI/2012-13/208). The Indian banking sector has been facing severe problems of raising Non- Performing Assets (NPAs). The NPAs growth directly affects the profitability of banks. The problem of NPAs is not only affecting the banks but is affecting the economy as a whole. In fact high level of NPAs in Indian banks is nothing but a reflection of industry and trade. NPA do not generate any income, whereas, the bank is required to make provisions for such as assets. (Olekar and Talawar, 2012). NPAs do not just reflect badly in a bank‟s account books, they adversely impact the working of economy. There are many research conducted on the topic of Non- Performing Assets (NPA) Management, concerning particular bank, comparative study of public and private banks etc. In this paper the researcher is considering the aggregate data of select public sector and private sector banks and attempts to compare analyze and interpret the NPA management from the year 2010 -2015. On the conceptual side, it gives an overview of NPA, various types of NPA and its cause. The tools used in the study are Least square method and ANOVA. The findings reveals the percentage of Gross NPA to Gross advances is increasing for public banks, the Estimated Gross NPA for 2014-15 is also more in public banks as compared to private banks and from the ANOVA test, it is concluded Ratio of Gross NPA to Gross Advances for public sector and private Sector Banks does not have significant difference between 2010 to 2015.

NON-PERFORMING ASSETS IN SELECTED INDIAN BANKS – AN ANALYSIS

Background: At present the NPAs are considered a big problem in banks. The problematic NPAs in the Indian banks are the foremost and the formidable problematic that has stunned the whole banking industry. Objective: The study is conducted to analyze the non-performing assets (NPAs) among state bank of India (SBI) and ICICI for which the secondary data is used. Method: The study is being done by using seven years (2011-2018) data gathered from annual reports. Results: The study highlighted that there was not any significant change in Gross NPAs / Gross advances ratio, Gross NPAs/ Total assets ratio; Net NPAs/Net advances ratio and Net NPAs/ Total assets ratio with SBI bank when compared to ICICI bank. In SBI, there is significant negative correlation between Gross NPA and Net Profit and between Net NPA and Net Profit. In ICICI bank, we also have observed negative correlation between Gross NPA and Net Profit and Net NPA and Net Profit but then it was not significant as in SBI. Total provision ratio was significantly higher in ICICI bank when compared to SBI bank. However, Shareholder’s risk ratio was comparable among both ICICI bank and PNB bank. In addition to there was significant decrease of amount outstanding in ICICI bank as compare to PNB bank. However provision thereon (of total assets) was comparable among SBI bank and ICICI bank. Conclusion: The study clarify that the magnitude of NPAs is increasing in SBI bank as compared to the ICICI banks. As the magnitude of NPAs is increasing in SBI bank compared to the ICICI banks. SBI bank has to give attention on their effective working to compete with ICICI banks. Therefore, SBI banks need to efficiently to regulate their NPAs with the purpose of increase their profitability.

The Indian banking sector is facing a serious problem of NPA. The magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled. NPAs have been fighting cyclical movement or dieses on week patient and it is an underdevelopment feature like chronic poverty. This paper deals with understanding the concept of NPAs, its magnitude and major causes for an account becoming non-performing and strategies for managing NPA in Indian banks. The best indicator for the health of the banking industry in a country is its level of Non-performing assets (NPAs). NPAs are one of the major concerns for banks in India. It reflects the performance of banks. Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of provisions, which bring down the overalls profitability of banks.

In a dynamic business environment, identifying the most efficient and effective business practice which could sustain the growth prospects of an organisation has been a great challenge. In the light of it, the present study highlights the opportunity of leveraging the organisation's human capital potential to endow with rapid reaction to turbulent environment and enhance performance. This research investigates the impact of HCM drivers on the organisational performance and also attempts to measure the human capital management (HCM) maturity level index, using a sample of 372 respondents from the select Indian public sector banks. Partial least squares structural equation modelling (PLS-SEM) was adopted in order to test the hypotheses. Findings and implications of the study are discussed, along with the limitations and future research avenues.

Purpose: The purpose of this study is to investigate the impact on bank profitability, capital structure, and financial stability and trend analysis regarding non-performing assets [NPAs] performance in selected Indian public sector banks vis-à-vis that observed in private sector ones during fifteen years. Methodology: For this research, a quantitative methodological approach has been used, and for quantifiable data, annual reports from four select banks, which include two public sector banks [The Bank of Baroda, The State Bank Of India] as well as two private sector banks [ICICI Bank Ltd., Nainital bank], are analyzed for the period ranging 2008-09 to 2022-23. The analysis calculates Compound Annual Growth Rates [CAGR] and t-tests, Panel Regression models to determine the relationship between GNPA additions, reductions, and write-offs with closing balances. Findings: A major increase in GNPAs is observed in the research among Scheduled Commercial Banks. The public sector banks found an even larger dynamism in NPA growth rates than private sector banks, manifesting the fluctuation to a high degree. The study identifies GNPA addition, reduction, and write-off as key determinants of their respective closing balances. Even though there have been many policy initiatives, the public sector banks [PSBs] remain at a higher level of NPAs due to governance deficits and political interference. The effectiveness of these predictors on GNPA is also confirmed using the Random Effect Model, thus requiring improved risk management practices. Originality: The content of this article is guaranteed to be original.

Background: At present the NPAs are considered a big problem in banks. The problematic NPAs in the Indian banks are the foremost and the formidable problematic that has stunned the whole banking industry. Objective: The study is conducted to analyze the non-performing assets (NPAs) among state bank of India (SBI) and ICICI for which the secondary data is used. Method: The study is being done by using seven years (2011-2018) data gathered from annual reports. Results: The study highlighted that there was not any significant change in Gross NPAs / Gross advances ratio, Gross NPAs/ Total assets ratio; Net NPAs/Net advances ratio and Net NPAs/ Total assets ratio with SBI bank when compared to ICICI bank. In SBI, there is significant negative correlation between Gross NPA and Net Profit and between Net NPA and Net Profit. In ICICI bank, we also have observed negative correlation between Gross NPA and Net Profit and Net NPA and Net Profit but then it was not significant as in SBI. Total provision ratio was significantly higher in ICICI bank when compared to SBI bank. However, Shareholder’s risk ratio was comparable among both ICICI bank and PNB bank. In addition to there was significant decrease of amount outstanding in ICICI bank as compare to PNB bank. However provision thereon (of total assets) was comparable among SBI bank and ICICI bank. Conclusion: The study clarify that the magnitude of NPAs is increasing in SBI bank as compared to the ICICI banks. As the magnitude of NPAs is increasing in SBI bank compared to the ICICI banks. SBI bank has to give attention on their effective working to compete with ICICI banks. Therefore, SBI banks need to efficiently to regulate their NPAs with the purpose of increase their profitability.

The purpose of the present work is to predict the non performing assets (NPAs) of the Indian Banks. Binary response models including Logit and Probit models have been applied to estimate the relationship between several factors and NPAs. Also, censored technique of Tobit analysis is applied to validate the results. A sample consisting of 37 Indian banks for the period 2005 – 2013 has been considered. The study revealed that there exist certain patterns in NPAs in the Indian Banks. Private sector banks have consistently lower NPAs as compared to public sector banks. The study also finds out that several firm level factors such as capital adequacy ratios, profitability, and size are helpful in predicting NPAs for the Indian Banks.

Non Performing Assets (NPA‟s) are one of the major areas of concern for the Indian banking industry. Non-Performing Assets are like a double edged sword. They do not generate any income, whereas, the bank is required to make provisions such as assets. (Olekar and Talawar, 2012).NPAs do not just reflect badly in a bank‟s account books, they adversely impact the national economy. There are many research conducted on the topic of Non- Performing Assets (NPA)Management, concerning particular bank, comparative study of public and private banks etc. This paper considers the aggregate data of public sector, private sector and foreign banks and attempts to compare analyze and interpret the NPA management from the year 2009 -2013. On the conceptual side, it gives an overview of NPA, Types of NPA, causes and on the calculation side, it covers various NPA related ratios, use of Least square method for estimating Gross NPAs in the year 2014, and also application of ANOVA test to judge the presence of any significant difference between ratio of Gross NPA to Gross Advances. The findings reveals the percentage of Gross NPA to Gross advances is increasing for public banks, ratio of Loss Advances to Gross Advances are higher in foreign banks, the Estimated Gross NPA for 2014 is also more in public banks as compared to private and foreign banks and from the ANOVA test, it is concluded Ratio of Gross NPA to Gross Advances for public sector, private Sector and foreign Banks does not have significant difference between 2009 to 2013.

Purpose: Worldwide economies have been shattered by the alarming increase in Non-Performing Assets (NPAs) in Banking Sector. In India, the rise in NPA levels gives a clear insight into the health of industry and state. This study aims to determine how NPAs in India impact the profitability of eight banks chosen from the public and private sectors; specifically: Punjab National Bank (PNB), Bank of India (BOI), UCO Bank, Punjab and Sind Bank (PSB), HDFC Bank, Axis Bank, ICICI Bank, and Yes Bank; during the period 2009/2010 to 2017/2018.Design/methodology/approach: The study utilised IBM SPSS version 20 application to carry out our statistical analysis of measures of central location (mean and median), measures of dispersion (standard deviation), to carry out the Kolmogorov–Smirnov test to check the normality of data, the Mann–Whitney U test (for two groups) for median comparison between private and public sector banks and the Kruskal–Wallis test (for more than two groups) for median comparison for more than two banks. p ≤0.01 and p ≤0.05 were the two-tailed significance level used for determining the significance of all statistical tests.Findings: Trend analysis and statistical tests show that the trend in public sector banks to have NPAs is higher compared to private sector banks, and losses arising from NPA impact the banks’ profitability.Practical implications: It is apparent that NPAs are a large threat to banks in India as it reflects the state of the Indian economy. The growth of the economic cycle is predominantly dependent on the smooth and profitable functioning of private and public sector banks. This current study focusses on and compares the impact of NPAs on the profitability of public and private sector banks. NPAs have grown exponentially more in the case of public sector banks than private sector banks, which has affected the former banks’ financial health and performance. Increases in the level of NPAs adversely affect the working style and long-term stability of public and private sector banks in the economy.Social Implications: NPAs have a negative influence on the profitability of the banks as well as on the economic growth of the country too. However, it is recommended that management in the banking sector, particularly the public banks, should use various preventive and recovery strategies to reduce the risk of failure and to keep track of NPAs to stay safe.Originality/value: This study aims to determine how NPAs in India impact the profitability of eight banks chosen from the public and private sectors; specifically: PNB, BOI, UCO Bank, PSB, HDFC Bank, Axis Bank, ICICI Bank, and Yes Bank; during the period 2009/2010 to 2017/2018.

The present study explores the complex domain of non-performing assets (NPAs) in a subset of Indian banks. The selected institutions are focal points for comprehending the complex dynamics around non-performing assets (NPAs), as they are representative of a range of sizes and policies. The research provides a comprehensive overview of the current NPA environment by not only estimating the NPAs but also closely examining their features, sectoral distribution, and emerging trends. The study assesses the complex relationship between non-performing assets (NPAs) and the profitability of the chosen banks concurrently, providing detailed insights into the mutually beneficial nature of these components. This in-depth analysis explores the complex world of non-performing assets (NPAs) in a few Indian banks. The selected institutions, which are representative of various sizes and approaches to operations, act as hubs for comprehending the complex dynamics related to non-performing assets. In addition to calculating the NPAs, the study examines their attributes, sectoral distribution, and written from a variety of angles, the study captures the opinions of several writers, each of whom adds a special perspective on non-performing assets. This diversity adds value to the research, generating insights that go beyond scholarly interest to have real-world ramifications for stakeholders, legislators, and bank executives.The research goes beyond conventional financial measures to navigate the difficulties presented by non-performing assets (NPAs), presenting these assets as dynamic obstacles requiring a comprehensive comprehension. The results are intended to help Indias banking industry become more robust and adaptable so that it can deal with the complexities of non-performing assets (NPAs) with skill and foresight. In the end, this study aims to be a symphony of viewpoints, providing a rich tapestry of insights that might help define a stable and sustainable future for Indias banking sector. KEYWORDS: Non-performing Assets, Indian Banking Sector, Profitability Analysis, Bad Loans, Financial Health, Credit Risk,Loan Portfolio, Financial Stabilty,Banking Operations, Risk Assessment, Banking Operations, NPA trends.

The instigation of Non-Performing Assets (NPAs) in Indian banks was post 2009, when world was doing quantitative easing (QE) to save them off recession in 2008. The problem of NPA in India has witnessed the gross NPA rise to 79.7% and net NPA from 2.8% in September 2015 to 4.6% in March 2016. Banking has its NPA data increasing year by year which is a serious concern for the Indian banks. In this paper, an algorithm to determine and predict NPA is proposed. The proposed algorithm creates a pattern based on NPA data sets from various banks, and features are extracted to predict and eradicate financial debts. Also, a visual banking dashboard is developed exclusively for NPAs. The learning task in the proposed Feature based Random Forest algorithm is carried out by incorporating features extracted from the dataset considered and hence improves the prediction accuracy. The result of prediction is visualized using Tableau which, not only provides insights on the data but also aids in data-driven decision making.

State Bank of India, simply called as SBI, is the largest state-owned banking and financial services company in India. SBI provides a range of banking products through their vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). Non-performing assets (NPAs) are one of the major concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset. The NPAs growth involves the necessity of provisions, which reduces the overall profits and shareholders’ value. The problem of NPAs is not only affecting the banks but also the whole economy. In fact, high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade. Various steps have been taken by government to reduce the NPAs. It is highly impossible to have zero percentage NPAs. But at least SBI can try competing with foreign banks to maintain international standard. This paper is framed with the aim of analysing the sensitivity of the NPAs to bank-specific variables and country's macro-economic factors. An attempt is made to empirically evaluate how NPAs in SBI banks are influenced by their advancing pattern and macroeconomic factors in the country.

Today Non-performing assets are one of the major concerns for all the banks in India. NPAs reflect the overall performance of Indian banks as NPA of the bank increases on the other hand profit of the bank deceases. The issue of Non-Performing Assets is become a hot topic in the financial world in India today. The increase of NPAs is not only affecting the profitability of the banks but also the country's economy. To improve the profitability, the NPAs have to be scheduled. The problem of losses and lower profitability is because of Non- Performing Assets (NPAs) and liability mismatch in banks and financial sector is totally depending on credit risk management in their business. This study provides an analysis of profitability, advances of bank indicators with a focus on the non-performing loans (NPAs) of Punjab National Bank. The empirical analysis demonstrates the relation between Net NPA, Advances and Net Profit.

Liquidity and profitability cannot resist to present a danger on the overall quality of Indian banks assets and their overall endurance. The Indian financial system has been significant problems with rising Non-performing assets (NPAs). The rise in nonperforming assets (NPAs) has become one of the major concerns for India’s banking industry. NPA’s act as a significant element to judge the efficiency of budgetary execution of a bank. The quality and sufficiency of the financial framework essentially relies on the quality of the assets held by the banking system. A significantly high level of NPAs within the banking industry leads to a likelihood of an enormous number of credit defaults that influence the overall quality of banking assets and has an impact on the overall estimation of the value of those assets. The issue of NPAs does not influence the banks but also the whole economy. In fact, NPAs significant level in Indian banks is merely an impact of the provision of interests of the business and exchange. To enhance the productivity and profitability, the NPAs have to be managed in a planned manner so that they do not become a major issue to deal with in the long run. Different advances have to be taken by governments to lessen the NPAs. Irrespective of the stress they put on both the banking system and the overall economy it is exceptionally difficult to have zero percentage NPAs. The paper focuses on an endeavor as to how proficiently private and public area banks deal with their NPA’s. Secondary data for the study was gathered for the chosen classifications of the banks from the RBI distributions for five years period i.e. from 2014 to 2019.