Net Non-Performing Assets Research Articles

Assessing Non-Performing Assets and Their Impact on Bank Profitability: A Comparative Analysis of HDFC Bank and ICICI Bank

Non-Performing Assets (NPAs) significantly affect the stability and profitability of banks by reducing income and increasing provisioning requirements. This study investigates the impact of NPAs on bank performance, with a specific focus on HDFC Bank and ICICI Bank. Utilizing secondary data from 2019 to 2023, the research analyzes key metrics including Gross NPA Ratio, Net NPA Ratio, Provision Ratio, and Problem Asset Ratio. Findings reveal that HDFC Bank maintains superior performance with lower NPAs and more conservative provisioning compared to ICICI Bank. The study highlights the broader economic implications of NPAs and offers recommendations for improving NPA management. This research contributes valuable insights into effective strategies for managing NPAs and enhancing bank profitability.

The dynamics of financial performance and market performance in the context of Indian banking industry

Background This study aims to gain insight into the effect of banks’ financial performance on their market performance. We conceptualized the research subject on the assumption that the financial performance of an organization is the most important criterion for triggering movement in its stock price. We explored various models and parameters to evaluate financial performance of banks and found CAMELS being one of the most comprehensive and appropriate model. We considered share price growth of banks to measure their stock market performance Methods We collected financial and stock market data pertaining to 32 listed Indian banks for the period 2018 to 2022. The study has employed multiple linear regression analysis of panel data for evaluating the relationship between independent and dependent variables. We adopted panel regression for data analysis and used the Prais- Winsten regression with panel corrected standard errors, as the data suffers from contemporaneous cross-sectional correlation. Results The results show that net non-performing assets, net interest margins, and return on capital have a significant negative impact on share price growth. The capital adequacy ratio and the current and savings account deposit ratios have a positive insignificant impact. The liquid asset-to-total asset ratio has a negative, insignificant impact. The coefficient of determination indicates that the share price growth of banks is more dependent on other factors which are not included in the regression analysis of this study. Conclusion This study helps investors and bankers understand the limited impact of financial parameters on banks’stock prices and to look for other parameters which explain the stock price movement better.

A Study on Net Non-Performing Assets (Net NPA) Management of Regional Rural Banks with Special Reference to Maharashtra Gramin Bank(MGB) and Vidharbha Konkan Gramin Bank (VKGB).

A Study on Net Non-Performing Assets (Net NPA) Management of Regional Rural Banks with Special Reference to Maharashtra Gramin Bank(MGB) and Vidharbha Konkan Gramin Bank (VKGB).

EFFECT OF DEPOSITS AND NON-PERFORMING LOANS ON BANK PROFITABILITY – A CASE STUDY ON CONVENTIONAL COOPERATIVE BANK OF BARODA REGION

The banking sector plays a vital role in providing essential financial services, facilitating the allocation of funds to productive ventures, and aiding in the implementation of government fiscal and monetary policies. Historically, Non-Performing Assets (NPAs) have posed significant challenges for banks, but reducing NPAs has now become a top priority. The strength of a nation's economy relies heavily on the health of its cooperative banking sector. This study analyzes the non-performing assets (NPAs) of The Pragati Co-operative Bank Ltd. over a six-year period from 2017-18 to 2022-23. The research examines various aspects related to NPAs, including gross NPAs, net NPAs, provisions made towards NPAs, loans and advances, deposits, and relevant ratios such as net NPA ratio, provision coverage ratio, and credit-to-deposit ratio. The data analysis reveals that the bank maintained a zero net NPA throughout the period, indicating effective provisioning strategies. While gross NPAs fluctuated, the provision coverage ratio remained strong, suggesting the bank's ability to withstand asset quality pressures. The study also investigates the relationship between gross NPAs and net profits using correlation and regression analysis, finding a positive correlation but minimal significant impact of gross NPAs on profitability. Overall, the research highlights The Pragati Co-operative Bank Ltd.'s proactive approach to NPA management, financial stability, and adaptability to changing market conditions.

IMPACT OF NPA (NON-PERFORMING ASSETS) ON THE PROFITABILITY PERFORMANCE OF THE SELECTED PUBLIC AND PRIVATE SECTOR BANK

The banking sectors performance is crucial for any economy as it reflects the countrys financial health. Banks play a crucial role in mobilising funds from various sectors of the economy, including both priority and non-priority sectors, to finance diverse economic activities.For many years, the banking industry has faced significant challenges due to unrecovered loans.The presence of Non-Performing Assets (NPAs) has significantly hindered the development and growth of the economy.This study delves into the impact of NPAs on the profitability performance of selected public and private sector banks in India from 2018-19 to 2022-23. Analysing key ratios like Gross NPA, Net NPA, and Return on Assets (ROA), sheds light on the relationship between NPAs and bank performance. The findings highlight higher NPA levels in public sector banks, adversely affecting their profitability. Moreover, a significant correlation between NPAs and profitability underscores the imperative of effective NPA management for enhancing bank profitability. These insights are crucial for bank management, policymakers, and regulators to devise strategies for mitigating NPAs and fortifying the banking sector.

COMPARATIVE ANALYSIS OF THE FINANCIAL PERFORMANCE OF THE BANKS

In the dynamic world of finance, banks play a pivotal role in economic stability and growth, and analysing their financial performance is crucial for investors, regulators, and policymakers. This study offers a comparative analysis of the financial performance of banks over five years (2018-19 to 2022- 23), underscoring their importance in the financial ecosystem. It evaluates profitability, asset quality, and liquidity, key indicators of a bank's health and efficiency. Profitability is assessed through Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM), while Asset Quality is gauged using Gross and Net Non-Performing Assets (NPA) ratios, and the Credit Deposit Ratio. Liquidity is examined via Liquid Assets to Total Assets and Liquid Assets to Demand Deposits ratios. Employing ratio analysis and a correlation matrix, the research uncovers trends and interrelationships in these financial metrics. The findings reveal an overall enhancement in profitability and asset quality, with notable increases in ROA and ROE and a decline in NPA ratios. Liquidity analysis shows varying trends. This study provides critical insights into the banking sector's financial health, highlighting areas of strength and potential risk, essential for informed decision-making and strategic planning in the financial industry.

A STUDY ON NON-PERFORMING ASSETS MANAGEMENT AT STATE BANK OF INDIA, ANANTHAPURA GATE, BANGALORE KARNATAKA

Non-performing assets (NPAs) are advances that are not repaid or serviced by the borrowers, posing a risk to the financial stability and profitability of banks. This research aims to inspect the management of NPAs at ‘State Bank of India’ (SBI), one of the largest public segment banks in India. The study has four objectives: to study the gross and net NPAs position at SBI, to analyse the sector-wise and segment- wise NPAs position at SBI, to ascertain the extent of provisions made for NPAs, and to determine the impact of NPAs and provisions on the profitability of SBI. The learning uses secondary data from the annual reports of SBI for the period from 2019 to 2023. The study employs descriptive statistics, correlation analysis, and hypothesis testing to analyse the data. The study discoveries that SBI has improved its asset quality and credit risk management over the five-year period, as evidenced by the declining trend of gross and net NPAs, the of NPAs in high-risk sectors, and the increase in provisions and profitability. The study also finds that there is a significant relationship between gross and net NPAs, and that there is a difference between provisions and net profit. The study suggeststhat SBI should focus on reducing the NPA ratio of the industries with high exposure and default rates, diversifying its loan portfolio, and strengthening its credit assessment, monitoring, and recovery systems. The study concludes that SBI has successfully managed its NPAs and enhanced its financial performance, which is beneficial for the country’s growth andeconomic growth. Key words: Non-performing assets, Gross NPA, Net NPA, Sector wise Performance, Provisions, Profitability

Effect of Mergers on Bank of Baroda Before and After, a Study of the Banking Sector

The banking industry has been essential to the economy’s development. Mergers and acquisitions are one of the best ways for banks to expand. The government merged banks when banks had more non-performing assets (NPA), less efficiency for work, no global reach, less profitable situation, or had other unimportant features. The government decided to combine three public sector banks in 2019, namely Vijaya Bank, Dena Bank, and Bank of Baroda (BOB). BOB rose to become India’s third-largest bank following the merger. In order to analyze the position of the bank, the study covered various indicators like Gross & Net NPA, operational profit, net profit, capital adequacy ratio (CAR), return on assets (ROA), return on equity (ROE), earning per share (EPS), deposits & advances. Charts are used to analyze these factors, and data from the two years before and two years after the banks’ merger has been used. Secondary sources such as annual reports, websites, various publications, etc. has been used to get the data. After the two-year merger, operating profits rose by 40.11% and 52.96%, while net profits rose by 25.81% and 91.01%, demonstrating improved efficiency. Since gross NPA exceed net NPA, banks had control the NPA such that inefficiency became efficiency. Deposits and advances have both climbed, and the CAR has as well, indicating that there is enough capital on hand to handle losses. Since the merger, EPS, ROA, and ROE have all dramatically increased. According to the study, the bank’s performance of BOB improved after the merger.

Competition, Consolidation and Convergence in the Indian Banking Industry- A path to $5 trillion economy

Banking is the backbone of any economy as it has a direct bearing on financial and economic development. India is currently $3.469trillion economy. To achieve the target of a $5 trillion economy, policy changes for India must include reforms in the banking sector. Inthe banking industry, competition is crucial for maximizing efficiency. The banking sector is going through unprecedented consolidationefforts through mergers and acquisitions. Financial inclusion is aided by consolidation. This gives banks greater resources with which tolend money make investments and expand their geographical reach. The financial sector's convergence is expanding quite quickly.Financial convergence aids banks in portfolio diversification. Financial Convergence relates to all types of interfaces between financialsuppliers and the demand for all types of financial products and services. In this paper, we have specifically discussed the convergencebetween the banking sector and the insurance sector. This paper highlights various approaches to assessing competition, models ofbancassurance, benefits, and challenges of bancassurance for banks, and the expected value of the bancassurance market by 2027. This paperhas analyzed the changes in various financial ratios like Gross Non-Performing Assets (GNPA), Net Non-Performing Assets (NNPA),Common Equity Tier- 1(CET-1) etc. of Union Bank of India after merger. This paper aims to study how a more competitive,consolidated, and convergent banking industry would contribute to making India a $5 trillion economy.

Factors Determining the Financial Performance of Public Sector Banks in India

Now, an attempt is made in this paper to examine the determinants of profitability in Indian public sector banks during the period 2010-11 to 2021-22. For this purpose, a sample of 12 public sector banks listed in NSE & BSE has been taken. Multiple Linear Regression Analysis has been used to investigate the impact of independent variables such as a bank’s asset size (Size), capital adequacy ratio (CAR), cost to income (CTI), net non-performing assets (NPA), credit risk (CrR), credit deposit ratio (CDR),economic growth (GDP) and consumer price index (CPI) inflation on key bank profitability indicators, i.e., return on assets (ROA), return on equity (ROE) and net interest margin (NIM)as dependent variables, separately.
 The main findings show that bank asset size, cost to income, net non-performing assets, credit deposit ratio, and inflation are negatively related to ROA, ROE, and NIM. Credit risk and economic growth (GDP) have a positive impact on ROA, ROE, and NIM. While the capital adequacy ratio hurt ROA and NIM except for ROE. Even though overall explanatory and macroeconomic factors have a significant 5 percent effect on ROE and NIM as denoted by F-statistics value. Moreover, the banking sector has benefited weakly significantly from both economic growth and the inflationary environment. It is also suggested that if banks concentrate on these variables, they would be able to generate better profitability in the present globalized era. These findings are of value to both academicians and policymakers.

Study on Comparative Analysis of Rising Non Performing Assets of Bank of Maharashtra and ICICI Bank

The banking industry plays a crucial role in the financial and economic growth of a country. A well-functioning banking sector acts as a catalyst in achieving rapid economic development by providing a stable financial system, mobilizing savings, channeling funds to productive sectors, facilitating transactions, and supporting monetary policy. However, one challenge that banks face is the issue of Non-Performing Assets (NPA), which refers to loans that are not repaid by borrowers as per the agreed terms. In conclusion, high levels of NPAs can have several limitations on the banking sector and the economy, including reduced incomes, unrecoverable principal amounts, negative indicators, operational inefficiency, political interference, and constraints on financing for certain sectors. Effective management of NPAs is crucial for maintaining a healthy banking sector and supporting sustainable economic growth. The present comparative study is aim to know NPAs of Bank of Maharashtra(BOM) and ICICI bank the study applied quantitative research method. In this paper, the NPAs of public and private sector banks in India has been compared over a period of last five financial years. It has been observed that the percentage of net NPAs to net advances in public sector banks is varied between 3.1-0.9. In case of private sector banks, it varied between 2.4-0.4. The collected data is analyzed using descriptive analysis, chi square test, etc. This study also identifies the cause of the increasing non-performing assets in the banks and a few suggestions.

Intellectual capital and non-performing assets: the role of knowledge assets in improving credit quality of Indian banking sector

Purpose Intellectual capital (IC) is beneficial to the improved performance of businesses, irrespective of their industry. The present study proposes to check if the use of IC can also help in improving the asset quality of banks. Thus, this study aims to examine the impact of IC and its components on non-performing assets (NPAs). Design/methodology/approach The study has been conducted with a sample of 30 Indian commercial banks and analysed over a time frame of 15 years (2004–2005 to 2018–2019). The modified value-added intellectual coefficient model has been used to measure the independent variables, IC, and its components. The dependent variable, NPA, has been represented by the net NPA ratio. Two-step system generalized methods of moments (SGMMs) have been applied for the regression analysis. Along with the short-term estimates provided by the SGMM approach, the long-term impact of explanatory variables on the dependent variables has also been seen. Findings The results of the study show that IC and its components are indeed helpful for the management of NPA, as they impact the problem loans negatively. Furthermore, the long-term benefits of IC in enhancing bank credit quality are more substantial. Practical implications The results from the present study can be used by bank management. The bank managers can draw inferences that the efficient application of IC can help them reduce their loan losses. Developing skills and knowledge of employees, maintaining close relations with stakeholders, significantly the customers, and putting more sophisticated processes and infrastructure to use can help banks to control their loan losses. Originality/value A major proportion of studies examining the role of intangible assets in various aspects of the banking sector focuses on the association between IC and the financial performance of banking entities. However, for banking institutions, apart from financial performance, improving credit quality is also imperative for staying afloat. Thus, to the best of the authors’ knowledge, the present study is one of the first to examine the relationship between knowledge-based assets (i.e. IC) and bank credit quality.

Impact of Non-Performing Assets on the Profitability of Banks: With reference to Cihan Bank

Banking services are subject to a variety of hazards, including credit quality, liquidity, interests’ risk, market risk, operating risk, and management risk. The greatest exceptional risk is default on a loan. The level of non-performing assets or the redemption loans determine a bank's sound financial status (NPAs). And that the rise in nonperforming assets (NPAs) necessitated more judgment, resulting in poorer bank profitability overall. The main thing to remember is that decreasing the number of nonperforming assets (NPAs) is necessary for banks to increase their profitability. The impact of nonperforming assets (NPAs) on Cihan Bank's profitability is investigated in this research. This was done in order to achieve the objective of the study represented in evaluating the nonperforming assets of Cihan Bank. And their impact on profitability. As well as to determine the relationship between net profit and total net NPA, ROA, and ROE. Cihan Bank's collected from the annual report are used in this study, which spans four years from 2017 to 2020. The correlation coefficient was used to assess the data. The study discovered that the NPA characteristics and also the profitability variables have a substantial negative relationship.

A Case Study on Gross and Net Non-performing Assets of State bank of India

The main objective of present study is to examine Gross non-performing assets and net non-performing assets of State Bank of India. For the present case study researcher has select five years period of study started from 2015-16 to 2019-20. Researcher has selected five NPA ratios; Gross NPA, Net NPA, Provision coverage ratio, Cash deposit ratio and Interest spread ratio. Chi- square test; time series analysis (Manually calculated) is applied on selected ratios of non-performing assets of State Bank of India. The study found out that there is no significant association in all selected ratios of state bank of India. It means in all the selected financial years ratios of non-performance assets is similar and null hypothesis is accepted. In this era banking sector has major suffer from non-performing assets. State bank of India is oldest bank with higher market capital. The paper investigates NPA of State Bank of India. This study helps to investors & managerial board for decision making.

COVID-19: boon/disguise for Indian banks?

Non-performing assets (NPAs) have long been one of the most visible and frightening issues that have shaken the whole banking industry around the world. As a result, the study's primary goal is to elucidate the facts surrounding NPAs, which have harmed the Indian banking industry's soundness, profitability, and performance between 1998–1999 and 2019–2020. The future trends NPAs across ownership types and sectoral groups were also explored. The estimations of NPAs drivers are examined in the second stage regression analysis, which takes into account factors such as innovative COVID-19 and policy initiatives. Later, a clear ranking for 52 samples in Indian banks was utilised to verify stability using the ratio of net NPAs to net advances. During the pre-crisis and crisis periods, gross NPAs and net NPAs as a percentage of gross advances both fell dramatically, according to the trend analysis. During turbulent years, however, they significantly rose. Finally, we noticed that the asset quality of scheduled commercial banks and public sector banks is improving following a seven-year gap during the COVID-19 years. In a Phase II regression analysis, this scenario was thoroughly explored for Indian banks and statistically proved that severe policy actions and the negligible influence of the unique COVID-19 crisis contributed to a decrease in their NPAs ratio during 1999–2020. Credit expansion, recognition and resolution of non-performing assets via the Insolvency and Bankruptcy Code Act, recapitalization of PSBs, and ongoing reforms in the COVID-19 period are all major contributors to sporadic credit default in SCBs and PSBs' balance sheets—which began in 2017–2018 and continued in 2019–2020.

Credit Risk and financial performance banks: a panel data analysis

The NIFTY50 index is the premier benchmark for the Indian stock market, comprising 50 companies from 13 diverse sectors. As five of the country's largest commercial banks are part of this index, their performance indicates the overall market performance. This study aimed to investigate the correlation between credit risk and the financial performance of these NIFTY50-indexed banks. Utilizing secondary data collected from the banks' annual reports over the past decade (2012-2021), the study employed panel data regression analysis to examine the relationship between return on equity and return on asset as measures of financial performance and capital adequacy ratio, net non-performing assets (NNPAs), and cost to income (CI) as measures of credit risk. The results revealed a significant relationship between credit risk and financial performance, with the capital adequacy ratio having no significant impact. The study recommends that NIFTY50-indexed commercial banks implement strategies to lower their CI and NNPAs to improve their financial performance.

Time to Simplify Banking Supervision—An Evidence-Based Study on PCA Framework in India

The financial stability of the commercial banking sector remains one of the critical responsibilities of the Reserve Bank of India (RBI). Weak banks cause instability in the financial system, triggering depositor runs. While several studies covered the prompt corrective action framework (PCA) for identifying weak banks, very few delve into the simplification of the same. This paper debates the opportunities to simplify using new parameters that reflect signs of weakness in a commercial bank. The PCA framework introduced in December 2002 marked a paradigm shift in the RBI’s supervision mechanism. At its inception, the RBI used three parameters (capital to risk-weighted assets, net non-performing assets, and return on assets) to identify weak banks. In 2017, the RBI added two more parameters (tier-1 leverage, common tier-1 equity) to build rigour in the framework. Banks that breach the threshold in any of these financial parameters could come under the RBI’s lenses. Under such a situation, the bank has to operate under constraints imposed on expansion, managerial compensation, raising deposits, and dividends distribution. This article explores new ratios and establishes their application in PCA using “linear discriminant analysis”. We debate reducing the number of parameters from five to two, and conclude that only coverage ratio (new) and credit-to-deposit ratio (new) could simplify PCA without diluting its effectiveness.

NPAs to advances

Banks in India have changed after the introduction of liberalisation, Privatisation, and Globalisation in 1991. The asset position of the banks became vulnerable due to the non-repayment of loans and advances during the last twenty-nine years (1991-2020). The basic question is on Non-Performing Assets (NPAs) and their influence on assets already accumulated in the banking system. The research questions addressed are: Whether gross and net NPAs to gross and net advances ratios are significant over time? and Are there trend differentials by type of banks? Using ANOVA fixed Effects model by types of bank, the results indicate that the All Scheduled Commercial Banks Gross Non-Performing Assets to Gross Advances ratio & Net Non-Performing Assets to Net Advances ratio is statistically significant. Further, no statistical significance is found for GNPAs to Gross Advances ratio and NNPAs to Net Advances ratio in the case of Public Sector Banks. The Private Sector Banks show statistical significance at 0.000% level both for gross and net NPAs to gross and net advances ratio. Foreign Banks show statistical significance in both ratios. The performance trend indicates the need for structural reformation of Public Sector Banks for better performance in the forthcoming years.

A Study on Non-Performing Assets (NPA) of Selected Private Sector Banks in India

The banking industry is critical to the success of any economy since it satisfies societal requirements. A bank is a financial entity that provides its clients with a variety of banking and other financial services. India's banking industry has been grappling with mounting non-performing assets. The rise of Non-Performing Assets has a significant impact on a bank's profitability. This research was undertaken in order to analyze the non-performing assets of a sample of chosen private sector banks in India. For that purpose, the researcher chose the top four private sector banks, namely HDFC bank, ICICI bank, Axis bank, and Indusland bank, based on their net sales from 2016-17 to 2020-21. To analyze non-performing assets in a selected private sector in India, gross non-performing assets (NPAs), net non-performing assets (NPAs), and net profit ratios were chosen. To test the hypothesis, the researcher employed a one-way ANOVA with a significance level of 5%. The study's primary conclusions include that HDFC bank's average GNPA and average NNPA are the lowest in the industry, while ICICI banks are the highest.

A Study on Non-Performing Assets (NPA) of Selected Private Sector Banks in India

The banking industry is critical to the success of any economy since it satisfies societal requirements. A bank is a financial entity that provides its clients with a variety of banking and other financial services. India's banking industry has been grappling with mounting non-performing assets. The rise of Non-Performing Assets has a significant impact on a bank's profitability. This research was undertaken in order to analyze the non-performing assets of a sample of chosen private sector banks in India. For that purpose, the researcher chose the top four private sector banks, namely HDFC bank, ICICI bank, Axis bank, and Indusland bank, based on their net sales from 2016-17 to 2020-21. To analyze non-performing assets in a selected private sector in India, gross non-performing assets (NPAs), net non-performing assets (NPAs), and net profit ratios were chosen. To test the hypothesis, the researcher employed a one-way ANOVA with a significance level of 5%. The study's primary conclusions include that HDFC bank's average GNPA and average NNPA are the lowest in the industry, while ICICI banks are the highest.