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7/30/2019 Comparative Analysis of NPAs of Public and Private
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Comparative Analysis of NPAs of
Public and Private Sector Banks inIndia
Under Guidance of
Dr. Pooja MalhotraASSISTANT PROFESSOR (USMS)
By
Birendra Debbarma
MBA (FM)
ENROLL NO. 05416659311
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Introduction
The banking industry has undergone a sea changeafter the first phase of economic liberalization in 1991and hence credit management. While the primaryfunction of banks is to lend funds as loans to various
sectors such as agriculture, industry, personal loans,housing loans etc., in recent times the banks havebecome very cautious in extending loans. The reasonbeing mounting non-performing assets (NPAs). An NPA isdefined as a loan asset, which has ceased to generate any
income for a bank whether in the form of interest orprincipal repayment. As per the prudential normssuggested by the Reserve Bank of India (RBI), a bankcannot book interest on an NPA on accrual basis.
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Private Sector Bank All those banks where
greater parts of stake
or equity are held by the
private shareholders and
not by government are
called "private-
sector banks.
Public Sector Banks Public Sector Banks (PSBs)
are banks where a majority
stake (i.e. more than 50%) is
held by a government. The
shares of these banks are
listed on stock exchanges.
There are a total of 26 PSBs
in India.
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A Comparison
Banks Network
Banks Growth
Productivity
Capital Adequacy
Asset Quality
Management Efficiency
Earnings Quality
Liquidity
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Parameter 1: Banks Network
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Parameter 2: Banks Growth
% Growth in Balance
Sheet Size
% Growth in Total Income
2010 2011 2010 2011
New Private Sector Banks 10.86% 23.51% -2.19% 14.63%
Public Sector Banks 17.93% 19.21% 12.46% 16.71%
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Parameter 3: Productivity
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Parameter 4: Capital Adequacy
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Parameter 5: Asset Quality
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Parameter 6: Management Efficiency
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Parameter 7: Earnings Quality
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Parameter 8: Liquidity
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Conclusion
It can be concluded that most of the new private sector bankshave shown better performance than their public sectorcounterparts during the period 2009-11. This in a way is very goodfor Indian banking system since past says that private banks are themost hit during recession. The main reasons for their better
performance were: New private sector banks have shown better net interest income
margin and fee income than most of the public sector banks.
The credit-deposit & investment-deposit ratio of new private sectorbanks were higher which reflected in higher interest income.
The operating efficiency was higher for most of the new privatesector banks.
The Return on Equity (ROE) was higher due to better asset quality.
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Thank You