CHAPTERCHAPTERCHAPTERCHAPTER----IIIIIIII

REVIEW OF LITERATURE

CHAPTER-II

REVIEW OF LITERATURE

In the context of banking sector, the issue of Nonperforming assets has been

studied and keenly observed by plenty of researchers, a synoptic review of the relevant

literature on the topic of NPAs has been described as under.

Luther (1976)1 chaired the committee appointed by Reserve Bank of India to

study the productivity, efficiency and profitability of commercial banks. The committee

analyzed the various issues related to the planning, budgeting and marketing in

commercial banks.

Swamy (2001)2 studied the comparative performance of different bank groups

since 1995-96 to 1999-2000. An attempt was made by researcher to identify factors

which could have led to changes in the position of individual banks in terms of their

share in the overall banking industry. He analyzed the share of rural branches , average

branch size, trends in bank’s profitability, share of public sector assets, share of wages

in expenditure, provision and contingencies, net non performance assets in net

advances, spread, has been calculated. He concluded that in many respects

nationalized public sectors banks much better than private banks, even they are better

than foreign banks.

Bloem and Gorter (2001)3 suggested that a more or less predictable level of non-

performing loans, though it may vary slightly from year to year, is caused by an

inevitable number of ‘wrong economic decisions by individuals and plain bad luck

(inclement weather, unexpected price changes for certain products, etc.). Under such

circumstances, the holders of loans can make an allowance for a normal share of non-

performance in the form of bad loan provisions, or they may spread the risk by taking

out insurance. Enterprises may well be able to pass a large portion of these costs to

customers in the form of higher prices. For instance, the interest margin applied by

financial institutions will include a premium for the risk of nonperformance on granted

loans. At this time, banks’ non-performing loans increase, profits decline and substantial

losses to capital may become apparent. Eventually, the economy reaches a trough and

turns towards a new expansionary phase, as a result the risk of future losses reaches a

low point, even though banks may still appear relatively unhealthy at this stage in the

cycle.

Rajeshwari Krishnan (2002)4 focused on the problem of swelling non- performing

assets in banks and financial institution of the country becomes more and more

unmanageable and created threats for the financial sector. She found that securitization

can be used for the liquidating the illiquid and long terms debut like loan receivables of

the financial institutions or bank by issuing marketable securities against them. She

concluded that the SARFAESI act is defiantly and big leap forward not only in the filled

of NPA management but also promoting the securitizing market in India. The act may

be required to fine tuned to bring in ‘natural justice’.

Rituparna Das (2002)5 performed a research on Managing the Risk of Non

Performing Assets in the Small Scale Industries in India. In this article the researcher

tries to seek a solution to the problem of NPA in the small scale industries under the

present circumstances of banking and insurance working together under the same roof.

What is stressed in this article is the pressing need of the small-scale entrepreneur for

becoming aware and educated in modern business management holding a professional

attitude toward rational decision making and banks have to facilitate that process as a

part of the credit policy sold by them.

Prashanth K. Reddy (2002)6 in his research paper on the topic, “A comparative

study of Non Performing Assets in India in the Global context” examined the similarities

and dissimilarities, remedial measures. Financial sector reform in India has progressed

rapidly on aspects like interest rate deregulation, reduction in reserve requirements,

barriers to entry, prudential norms and risk-based supervision. The study reveals that

the sheltering of weak institutions while liberalizing operational rules of the game is

making implementation of operational changes difficult and ineffective. Changes

required to tackle the NPA problem would have to span the entire gamut of judiciary,

polity and the bureaucracy to be truly effective. This paper deals with the experiences of

other Asian countries in handling of NPAs. It further looks into the effect of the reforms

on the level of NPAs and suggests mechanisms to handle the problem by drawing on

experiences from other countries.

U.N. Lakshman (2003)7 in his study pointed out the reasons for NPA’s in Indian

bank. He started the reasons could be, diversion of the bank fund, time/cost overrun

while implementing the project, business failures like product failing to capture market,

inefficient management, strained labor relations, old technology and product

obsolescence, recession in some foreign countries and adverse exchange rate

government policies toward excise, imports and exports , willful default frauds,

misappropriations, deficiencies in the system of credit appraisal monitoring and follow

up, delay in settlement/ subsidies. He further mentioned some of the methods to

recover NPAs they are Recapitalization and asset reconstruction fund. He highlighted

the steps taken 15 contain NPAs they are as following RBI stressed the need for credit

appraisal and credit supervision since the basic problem is at lone decision stage,

stressed the need to monitor stock and operation and end use statements, detailed

guidelines have been issued to take steps to avoid sickness and also to nurse bake the

align units, stressed the need to constitute recovery cells, NPA management

departments and fixed recovery target for banking units, the debt recovery tribunal

should depose off the issues within six months. It should be given freedom to regulate

its own Procedure subject to the provision of the Act of 1993, on the filling of suit in

court law; the following guidelines are prescribed which registered and the enforceable.

He made suggestions that areas which created the problem, in most costs the

barrowers are ot be found. The documents charging should with the bank including the

location map of properties. Must avoid expert’s orders to eliminate scopes for reopening

the mater and also further litigation cost memo should be filled with in 7 days from the

date of court order which includes application fee, advocate fee, insurance /go down

/storage charges and other expenses incurred by a bank.

G. Chandrashakar Rao (2003)8 studied the present and most critical issue faced

by the banking system has been hug pile-up of nonperforming assets which the bank

have come to be saddled with. As result the survival of many weak bank managements

and unions of their employees. He noticed that the main reasons for the banking units to

become weak leading to mounting NPAs in diversification of funds by promoters, the

other region is the tardy legal system and the inadequate legislation for recoveries. The

reasons stated for the increasing NPAs in the primary sector are directed and pre-

approved loans sanctioned under sponsored programmers’, absence of any securities,

lack of effective follow up etc,. In view of this, it is not desirable to expect the other

hand, they have to work as promoted of the economic development on the other hand

,this call for effective risk return approach to be adopted by the banks. It is found that

majority of the defaulters are willful defaulters and hence criminal proceedings against

corporate defaulters are to be issued to recover this national wealth. Government shall

ensure proper legal foundation for enforcement of contracts and recovery of dues by

banks.

P.Rajaseker Reddy and D. Ramana Reddy (2003)9 made a conceptualized study

in Andhra Pradesh in nonperforming asset. They noticed that the internal and external

courses for NPAs have included are many sector of industry. Failures to introduce

financial management , managerial deficiency over the estimation demand,

underestimation of capital costs, delay in implementing project which result is cost

acceleration, of finance and working capital, surplus labor, recession in demand,

inadequate availability of resources like relation caused heavily industrial sickness

which paned the way to the evaluation of NPAs in industrial sector. They figured out the

problem of NPAs in state and made some suggestion they are extending role of banks

and financial institutions not to keep their activity limited to financing but also to monitor

the functioning of industry from time to time, introducing entrepreneur training,

counseling and guidance for the new entrepreneurs. Establishing a separate

department of rehabilitation of NPAs which concentrates on diagnosing the reason for

NPAs and to detect rehabilitation process by catering to economic, administrative,

technical and infrastructural help.They concluded that the growing industrial sickness

among private, public an co-operative endeavors, certain selections were suggested to

encounter industrial sickness and to minimize the chances of evolution of NPA in any

industry. The suggestions are promotion and encouragement to traditional industrial

depending upon the skill and workmanship of the workers engaged, reforming the role

of financial institutions not restricted only to lend finances but to act as guide and co-

coordinator in functioning of the industry so as to help them thrive, establishment of a

separate and special department for rehabilitation of NPAS which mainly concentrates

on and diagnoses the reasons to economic, administrative, technical and infrastructure

help.

C.Sivarami Reddy and Smt.V.Kalavathi (2003)10 studied the reasons remedies of

non-performing assets, they found that the reasons for NPA were diversification of

funds, mostly for expansion / diversification of business like product / market failure,

failure, inefficient management, inappropriate technology, labor unrest etc., changes in

the macro environment like recession, infrastructural bottle necks etc., time / cost over

runs during project implementation, changes in government policies, and delay in

release of sanctioned limits by banks. They highlighted various steps for reducing

NPAS they are, study the Problems of NPA branch wise, amount wise and age wise,

prepare loan Recovery policy and strategies for reducing NPA, create special cells at

the Head office / zonal office level to look after critical branches where NPAs are on the

high side, select prepare technique suitable for the NPA and monitor it in a time bound

action plan. They concluded that NPA is not just a problem for banks they are bad for

the economy. The money locked up in NPA is not available for productive use and to

that extent the banks seek to make provisions for NPA or write them off.

Amitabh Joshi (2003)11 conducted a survey on “Analysis of Non-Performing

Assets of IFCI Ltd”. The study found that Profitability and Viability of Development

Financial Institutions are directly affected by quality and performance of advances. The

basic element of Sound NPA Management System is quick identification of Non-

performing advances, their containment at minimum levels and ensuring that their

impingement on the financials is at low level. Excessive reliance on Collaterals has led

Institutions to long drawn litigations and hence it should not be sole criteria for sanction.

Banks should manage their exposure limit to few borrower(s) and linkage should be

placed with net owned funds for developing control over high leverages of borrower

level. Study also revealed that exchange of credit information among banks would be

immense help to them to avoid possible NPAs. Management Information system and

Market intelligence should be utilized to their full potential.

Milind Sathya (2005)12 examined the effect of privatization of banks on

performance and efficiency. The data taken was for five years (1998-2002) and it was

analyzed by using difference of means test. The banking sector in India includes

domestic banks (privately owned, partially privatized banks, fully PSB’s) as well as

foreign banks, and objective of this study is to study the impact of privatization on the

banking firms. It was concluded that partially privatized banks have performed better as

compared to fully PSB’s in respect of financial performance and efficiency. Partially

privatized banks have continued to show improved performance and efficiency in the

year after privatization.

Datta Chaudhuri (2005)13 examined the “Resolution Strategies for Maximizing

Value of Non-Performing Assets (NPAs)”. The article indicates that declining capital

adequacy adversely affects shareholder value and restricts the ability of the

bank/institution to access the capital market for additional equity to enhance capital

adequacy. So, if a resolution strategy for recovery of dues from NPAs is not put in place

quickly and efficiently, these assets would deteriorate in value over time and little value

would be realized at the end, except may be its scrap value. The purpose of this paper

is to indicate the various considerations that one has to bear in mind before zeroing on

a resolution strategy and provides a State - Resolution - Mapping (SRM) framework.

However, the paper has not specifically discussed about the various resolution

strategies that could be put in place for recovery from NPAs, and in particular, in which

situation which type of strategy should be adopted.

Ved Pal and Malik (2007)14 in their empirical paper examined the difference in

financial characteristics of public, private and foreign sector banks based on factors

such as profitability, liquidity, risk and efficiency. Sample of 74 Indian commercial banks

consisting of 24 public sector, 24 private sector and 23 foreign banks was taken for the

period of 2000- 2005. Multinomial regression analysis was used and results revealed

that foreign banks proved to be high performer in generating business with a given level

of resources and they are better equipped with managerial practices and in terms of

skills and technology. Foreign banks were more consistent with market system as

reflected in terms of net interest margin. The public banks emerged as the next best

performer after foreign banks. There were giving a higher return on equity in

comparison to foreign and private banks. It was high performer in economizing their

expenses which was reflected from expense rate and efficiency ratio. The private sector

banks emerged with a better utilizer of resources as compared to PSB’s.

Bhatia (2007)15 in his research paper entitled, “Non-Performing Assets of Indian

Public, Private and Foreign Sector Banks: An Empirical Assessment”, explores an

empirical approach to the analysis of Non-Performing Assets (NPAs) of public, private,

and foreign sector banks in India. The NPAs are considered as an important parameter

to judge the performance and financial health of banks. The level of NPAs is one of the

drivers of financial stability and growth of the banking sector. This paper aims to find the

fundamental factors which impact NPAs of banks. A model consisting of two types of

factors, viz., macroeconomic factors and bank-specific parameters, is developed and

the behavior of NPAs of the three categories of banks is observed.

Thomas P. Ferguson (2007)16 conducted a research on “Observations on the

Securitization of Non-Performing Loans in Russia”. Asset securitization is a burgeoning

trend in Russia as companies burdened by poor credit ratings seek access to capital at

lower costs than they would be allowed in traditional equity or debt markets. Study

indicates that securitization of these bad loans has not occurred in Russia at the levels

one might expect. This has been due to both a relatively small amount of loans that

under-perform as well as legal and regulatory impediments that have discouraged

investors and lenders alike. The study has been conducted to examine the expansion of

consumer credit in Russia and the circumstances under which it is occurring indicate

that the level of non-performing loans is due to rapidly increase and as the rationale for

maintaining the impediments that stand in the way of securitizing these loans is being

re-examined, those impediments are being scaled back to make way for market

participants to engage in such securitizations. Thus, this article anticipates a significant

rise in the level of non-performing loans, which will be logically paired with an increased

interest of Russian lenders in securitizing these assets.

Karunakar M., Vasuki K.and Saravanan S., (2008)17 made an attempt is made in

the paper that what is NPA? The factors contributing to NPA, the magnitude of NPA,

reasons for high NPA and their impact on Indian banking operations. Besides capital to

risk weightage assets ratio of public sector banks, management of credit risk and

measures to control the menace of NPAs are also discussed. The lasting solution to the

problem of NPAs can be achieved only with proper credit assessment and risk

management mechanism. It is better to avoid NPAs at the market stage of credit

consolidation by putting in place of rigourous and appropriate credit appraisal

mechanisms.

M. Karunakar et.al (2008)18, Study the important aspect of norms and guidelines

for making the whole sector vibrant and competitive. The problem of losses and lower

profitability of Non-Performing Assets (NPA) and liability mismatch in Banks and

financial sector depend on how various risks are managed in their business. Besides

capital to risk Weightage assets ratio of public sector banks, management of credit risk

and measures to control the menace of NPAs are also discussed. The lasting solution

to the problem of NPAs can be achieved only with proper credit assessment and risk

management mechanism. It is better to avoid NPAs at the market stage of credit

consolidation by putting in place of rigorous and appropriate credit appraisal

mechanisms.

Nelson M. Waweru et.al (2009)19, study that many financial institutions that

collapsed in Kenya since 1986 failed due to non performing loans, this study

investigated the causes of nonperforming loans, the actions that bank managers have

taken to mitigate that problem and the level of success of such actions. Using a sample

of 30 managers selected from the ten largest banks the study found that national

economic downturn was perceived as the most important external factor. Customer

failure to disclose vital information during the loan application process was considered

to be the main customer specific factor. The study further found that Lack of an

aggressive debt collection policy was perceived as the main bank specific factor,

contributing to the non performing debt problem in Kenya.

Usha Arora, Bhavna Vashisht & Monica Bansal (2009)20 in the research on “An

Analytical Study of Growth of Credit Schemes of Selected Banks” analyzed and

compared the performance (in terms of loan disbursement and non- performing assets)

of credit schemes of selected banks for the last five years. This paper is divided into two

parts. In the first part, bank-wise as well as year-wise comparisons are done with the

help of Compound Annual Growth Rate (CAGR), mean and standard deviation; and in

the second part, a positive relationship is found between total loan disbursement and

total NPA O/S of selected banks with the help of a correlation technique. The study

found a positive relationship between total loan disbursement and total Non-Performing

Assets Outstanding (NPA O/S) of selected banks.

Vikas and Tandon Sunman (2010)21 attempts to analyze the financial

performance of public sector banks in India. Public sector banks form major part of total

banking system in India so there is a need to evaluate the performance of these banks.

The study is based upon secondary data covering the period from 1997-2007. For

analyzing the performance Compound Annual Growth rate and Coefficient of Variation

of advances, deposits, total assets, return on assets, and return on equity and spread

ratio are calculated. Decline in growth of nonperforming assets ratio is also considered

for this evaluation. It is concluded the CAGR of various variables have shown variation s

from bank to bank. State Bank of Indore has shown maximum CAGR in case of total

advances, total deposits and total assets. Punjab & Sind Bank has shown least growth

of deposits and advances and State Bank of India has least growth of deposits. CAGR

of return on equity and return on assets was at peak of United Bank of India whereas

Dena Bank, Punjab& Sind Bank and Indian Bank have shown negative trend in these

ratios. Decline of NPA’s ratio was highest in case of State Bank of Hyderabad and least

in case of Dena Bank.

Meenakshi Rajeev,H P Mahesh (2010)22 studied banking sector reforms and

NPA’S in Indian commercial banks to examine the trends of NPA‟S in India from

various dimensions and to explain how immediate recognition and self monitoring has

been able to reduce it to a great extent. The study analysed the different aspects of

NPA‟S like NPA in India comparative to other countries, NPAS of Indian banks as per

the different sectors and recovery of naps through various channels. It was found that

NPAS in the contributory factor for crisis in the economy and root cause of the recent

global financial crisis. It was observed that NPA‟S in priority sector is still higher than

that of the non priority sector due to socio economic objectives of banks.

Ashok Khurana and Mandeep Singh (2010)23, stated that issue of mounting

NPAs is a challenging to public to public sector banks. The study found that the asset

wise classification of PSBs is in right direction and there is significant variation in the

recovery of NPAs in the different sector. The research observed that PSBs should not

be loaded with the twin object of profitability and social weal fair.

Jaya Shukla and Gaurav Bajpai (2010)24 in their paper presents a mathematical

model for problem of stability of non- performing assets (NPA’s) growth in banking

sector. The various variables leading to high NPA are identified. A sufficient criterion

which ensures the damping out of the effects arising out of the perturbations in the

variables is obtained. The model assumes prevalence of normal conditions in banking

sector in terms of liquidity, political interference and other external factors affecting the

stability of NPA. The model emphasizes on growth of NPA’s at stable rate to improve

banks asset portfolio and quality of service assured by banks.

Goyal Kanika (2010)25 observed increase in gross as well as net NPAs in

absolute terms and improved asset quality of banks. The public sector banks have

managed its assets proficiently; however, the study observes that increased NPA’s in

the agriculture sector is a matter of great concern. The study is analytical in nature, and

it is based on the secondary retrieved from Report on Trend and Progress of Banking in

India, Report on Currency and Finance etc. The scope of the study is limited to the

analysis of NPAs of the public sector banks for the period 2002-03 to 2008-09. It

examines trend of NPAs; quality of assets; health of several loan assets; sector wise

NPAs etc. The data has been analyzed by statistical tools such as descriptive statistics,

correlation, regression analysis, one-way ANOVA, and post-hoc Tukey HSD procedure.

Hosmani.A.P and Jagadish Hudagi (2011)26 examine the existing position of

banks in respect of Non performing assets, ascertain the causes of the problem and its

remedial measures. Loan assets of banks are classified in to four categories i.e.

standard assets, sub-standard assets, doubt full assets, and loss assets. Standard

assets being the good quality of loan assets on the other hand sub-standard assets,

doubt full assets, and loss assets put together constitutes non performing assets. All the

other three categories of NPAs as a percentage to loan assets are recorded a decline

trend over the study period of 20005-06 to 2009-10. The followings are some of the

important findings of the study.

� The fund blocked in as Gross NPA is huge i.e. amt 59926 crore during the year

2009-10. But there is no time frame and follow up to recover the blocked amount.

� The NPA level during the study period is quite alarming but it is positive sign to

note that the percentage of NPAs is reducing i.e. it was 3.6 in 2005-06 and came

down to 2.19 in 2009-10.

� The non performing assets came down considerably i.e. from 3.7 percent in

2005-06 to 2.1 percent in 2009-10. Indicating a positive trend of financial

soundness.

� Sector wise analysis of NPAs shows that the proportion of NPAs for the priority

sector loan has increased on an average i.e. 57.1 percent compared to 41.7

percent to non priority sector and only 0.94 percent to public sector.

� Result of ANOVA sector wise break up of NPAs indicates that the null hypothesis

of no significant association between, priority sector, public sector, & non priority

sector has been rejected.

� Specific recovery targets wise monthly, quarterly, and annually were fixed, but

these targets neither monitored properly nor achieved regularly.

� Lack of commitment towards the work by the bank employees. Political

involvement in the administration.

� In ability to adopt, changes and rigidity in decision making by the public sector

banks compared to Private sector banks, Foreign banks and NBFC to improve its

performance.

Kamalpreet Kaur and Balraj Singh (2011)27 consider that the Non-performing

assets 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 issue of Non Performing Assets has been

discussed at length for financial system all over the India. 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. The

Indian banking sector is facing a serious problem of NPAs. The extent of NPAs is

comparatively higher in public sectors banks. To improve the efficiency and profitability,

the NPAs have to be scheduled. Various steps have been taken by government to

reduce the NPAs. It is highly impossible to have zero percentage NPAs. But at least

Indian banks can try competing with foreign banks to maintain international standard.

The problem of losses and lower profitability of Non-Performing Assets (NPAs) and

liability mismatch in banks and financial sector depend on how various risks are

managed in their business. An attempt is made in the paper that what is NPAs? The

factors contributing to NPAs, the magnitude of NPAs, reasons for high NPAs and their

impact on Indian banking operations. Besides capital to risk weight age assets ratio of

Public and Private sector banks, management of credit risk and measures to control the

menace of NPAs are also discussed.

Ramesh.K.V, Sudhakar.A., (2012)28 investigated the NPA management in public

sector banks a case study of canara bank and state bank of India to analyse the NPA of

former mentioned banks. Data was collected for a period of ten years between 2000 to

2010.It is concluded that if the proper management of the NPAs is not undertaken it

would be hampers the business of the banks. The NPAs would affect business cycles,

legal framework, ethical standards, regulatory and supervisory system and bank specific

factors like credit appraisal system, credit recovery procedures risk management

system and the motivational level of employees. It is found that there is down trend in

NPAS of selected banks by establishing appropriate systems internally to reduce and

eliminate at the earliest.

Sandeep and Parul Mital (2012)29 analysed the comparative position of

nonperforming assets of selected public and private sector banks in India to find their

efficiency through comparative study. Data has been collected from various secondary

sources for period of 10 years and analysed with descriptive statistics and ANOVA. All

the banks are making polices trying for the containment of NPA‟S for improving their

asset quality and profitability. PNB and HDFC banks are found superior in management

of NPA‟S comparative to SBI and ICICI and private sector banks are much comfortable

and efficient comparative to public sector banks.

Gurumoorthy T.R. AND SUFHA B, (2012)30

analyzes the classification of loan

assets in PSBs, composition of NPAs in different sectors and NPAs position in PSBs. In

this study, it is observed that PSBs exercised stringent control measures to reduce the

level of NPAs. The author concludes that Non-Performing Assets may not turn banks

into Non-Performing Banks; instead steps should be taken to convert Non-Performing

Assets into Now-Performing Assets. As far as old NPAs are concerned, a bank can

remove it on its own or sell the assets to Asset Management Companies (AMCs) to

clean up its balance sheet. For preventing fresh NPAs, the bank itself should adopt

proper policies. It is better to avoid NPAs at the budding stage of credit consideration by

putting in place of rigorous and appropriate credit appraisal mechanisms. PSBs should

be well versed in proper selection of borrower or project and in analyzing the financial

statement.

Vivek srivastava,Deepak bansal (2012)31 did a “a study of trends of non-

performing assets in private banks in India” to find out whether there is positive trend

and control of NPA‟S by the private sector banks in India. The data were collected for a

period of five years from 2007-2012 from various secondary sources and analysed by

average and comparative percentage analysis. It was found that that the level of NPAS

is alarming with public sector banks in India but there is slight improvement in the asset

quality reflected by decline in the NPA percentage. The banks should take timely action

against degradation of good performing assets.

Balasubramaniam C.S.(2012)32 in his paper assumes significance with the recent

proposal by RBI to introduce Basel III norms in the banking sector from January 2013.

Basel III framework of guidelines formulated by Bank for International Settlements (BIS)

in consultation with central banks operating in a number of countries all over the world

expect the participating banks in their respective economies to be following healthy

financial and operational management policies. The paper is divided in four parts. The

first part brings out a discussion on the concept of NPA in the context of identification

and control procedures, impact of NPA on profitability and financial soundness of banks

in general. The second part presents a trend analysis of NPAs followed by a series of in

depth analyses on the high level of borrowings from banking sector indicating a buildup

of sectoral credit booms in general and also raising concerns about financial

performance and operations of the borrowers. The third part dwells on the impact of

restructuring of advances by banks on the basis of asset classification. Finally, certain

issues and perspectives/ challenges on the performance of banking sector and financial

stability of the economy emerge as conclusion.

Chandan Chatterjee, Jeet Mukherjee and Ratan Das (2012)33 attempts to focus

mainly on the causes and consequences of NPAs, policy directives of RBI, initiatives of

Indian Government, scenario of NPAs sector wise and bank group wise and finally the

curative measures for NPAs in India. The study reveals that there is a significant

improvement in NPAs recovery of all bank groups. It is observed that there is a sharp

fall in Gross NPAs percent to Gross Advances is 5.2% in 2005 and it got decreased to

2.25 % in 2011 in case of SCBs. Similarly Net NPAs percent to Net Advances was 1.9

in 2005 and reduced to 0.97%. The author suggests that considerable efforts are

required at RBI, Ministry of Finance and all the banks level to control the menace of

NPAs. The public sector banks should not be loaded with the doppelganger objectives

of social welfare and profitability which seems to be mutually incongruent. While gross

NPA reflects the quality of the loans made by banks, net NPA shows the actual burden

of banks. The banks have to take a pivotal role to reduce NPAs in a time bound

strategic approach. There has been an incessant decrease in the time period to declare

a loan as non-performing.

Rao Sambasiva K. et al (2012)34 investigates the last decade performance of

scheduled commercial banks in India. The development of banking sector and its

stability is essential for the overall development of the economy. The stability of banking

sector is determined on the basis of its performance and quality of assets. The study

examines the various issues of the NPA’s and asset quality aspects of Indian scheduled

commercial banks of public and private sector. The Indian banking sector underwent

structural changes during post liberalization era with the implementation of prudential

norms for income recognition, provisioning and asset classification. The banking sector

is going to implement Basel III according in the near future. The study has been

conducted by using data available for the period 2000-2011. A notable result is the

financial stability of public and private sector banks showed a tremendous improvement

by way of minimizing the level of NPAs i.e. sub-standard, doubtful assets, loss assets.

Rajveer Rawlin (2012)35 attempted to develop a predictive model for the NPA%

at both the gross and net level from the advances made at a midsized Indian national

bank. A strong correlation was observed between gross and net NPA% and the

advances made suggesting that estimates of gross and net NPA can be made from

advances. Linear and non linear models were fit to predict the NPA% from the amounts

advanced. A non linear model linking both Gross and net NPA to advances provided the

best curve fit and the least deviation from actual values. Thus by simply looking at

advances an overall picture of the banks NPA level can be ascertained.

As per Rekha Gupta and Nitin S. Sikarwar (2013)36 the Government and the

banks have been initiated a number of strategies in the past and are being initiated at

present to bring down the level of NPAs. In view of the vital role of nonperforming

assets on the profitability, Punjab National Bank and HDFC Bank have been selected

for the purpose of present research because both are the giant banks in public and

private sector, so a comparative study is made. The author make an analytical study in

respect of Non Performing Assets and their recovery management, so that it may be

useful at all banking levels regarding the efficient utilization of resources which may lead

to better working of the banking sector.

Rani Chanchal (2013)37 was undertaken a study to know the impact of

securitisation legislation in the management of NPAs in selected financial institutions.

To attain this target following banking institutions operating at their local, regional and

zonal levels have been approached to provide the requisite data and information. Banks

operating at all the three levels include State Bank of India, Oriental Bank of Commerce,

Union Bank of India, Allahabad Bank, Bank of Baroda, Canara Bank and Punjab

National Bank. Banks operating at two levels include Bank of India, Central Bank of

India, Dena Bank, Punjab & Sind Bank, State Bank of Patiala, Syndicate Bank and

Vijaya Bank. Banks operating at only one level include Andhra Bank, Bank of

Maharashtra, Corporation Bank, Indian Bank, Indian Overseas Bank, United Bank of

India and UCO Bank. The study reveals that the NPAs have not only affected the

profitability and productivity of the banks and financial institutions, but also put a stigma

on the image of Indian banking and a drain on the very value system of the society.

Samir and Deepa Kamra (2013)38 in their paper analyses the position of NPAs in

selected banks namely State Bank of India (SBI), Punjab National Bank (PNB) and

Central Bank of India (CBI).It also highlights the policies pursued by the banks to tackle

the NPAs and suggests a multi-pronged strategy for speedy recovery of NPAs in

banking sector. The study spans the period starting from 1996-1997 to 2009-2010.The

authors analyze the trends in NPAs in terms of values, gross and net NPAs as a

percentage of gross advances and net advances, gross and net NPAs as a percentage

of Total Assets respectively. The paper details about the sector-wise classification of

NPAs, reasons for their occurrence, the effects of NPAs on banks, and frequency

distribution of public sector banks by ratio of net NPAs to net advances.

Selvarajan B. and Vadivalagan G.(2013)39 considers that the problem of NPA is

not limited to only Indian public sector banks, but it prevails in the entire banking

industry. Major portion of bad debts in Indian Banks arose out of lending to the priority

sector at the dictates of politicians and bureaucrats. If only banks had monitored their

loans effectively, the bad debt problem could have been contained if not eliminated. The

top management of the banks was forced by politicians and bureaucrats to throw good

money after bad in the case of unscrupulous borrowers. The authors estimates that the

Agriculture advances have registered a 7 fold net increase, SSI advances have set a

record net increase of 8.5 times and the advances to other priority sector have made a

net increase of 4.5 times, that of their respective figures in 2001–02.

Ahmad Zahoor and Jegadeeshwaran DM. (2013)40 was undertaken a study to

study the non performing assets of nationalised banks. The reason being mounting non-

performing assets (NPAs), NPA account not only reduces profitability of banks by

provisioning in the profit and loss account, but their carrying cost is also increased

which results in excess & avoidable management attention. Apart from this, a high level

of NPA also puts strain on a bank‟s net worth because banks are under pressure to

maintain a desired level of Capital Adequacy and in the absence of comfortable to

assess the health of various categories of loan assets in various categories of banks.

The data was collected for a period of five years and analysed by mean, CAGR,

ANOVA and ranking banks. The individual banks got ranks as per their performance in

management of NPA‟s. It was also tested, whether there is significant difference

between nonperforming assets of banks, it was found that there is significant difference

in the level of NPA‟s of nationalised banks which reflect their varied efficiency in the

management of nonperforming assets.

Kartikey Koti, (2013)41 considers that in the recent years public sector banks

have been experiencing a growth in profits. But many drivers of profits of not

sustainable in the long run, They should focus on key factors like diversified loan

portfolio, robust Internal risk management techniques by putting in place appropriated

risk Measurement and mitigating framework, sophisticated credit monitoring Systems,

higher share of non fund income in total, which helps in sustainable Profits in long run.

Indian banking has witnessed tremendous changes in the wake of the new economic

reforms ushered in the year 1992. The reforms have positively impacted on the banking

system, which has become resilient, Competitive and efficient with better productivity.

The winning strategies for them could be clear customer segmentation and product

offerings focus on Cost efficiencies and entrepreneurial ability to face stiff competition.

Reserve bank of India which is the central banking authority aims at financial stability

through structural and regulatory measures. It envisages the new economic reforms in

the banking sectors as those aimed at enhancing operational efficiency thorough

completion and prudential norms. The biggest challenge for the banks in India is

efficient management of non-performing assets (NPA’s). The study focuses to know

what the non-performing Assets are, and how they can handle to reduce loss. The study

reveals the reason for NPA’s, methods that are used to control NPA’s. The data for the

study is collected based on informal discussions and from manuals, annual reports of

the Krishna Grameena Bank.

Garg Sambhav et al (2013)42 an attempts has been made to compare different

bank groups as well as bank- wise data relating to Gross NPAs to Gross Advances. The

paper also shows Priority and Non- Priority Sector Advances of Scheduled Commercial

Banks. The present study highlighted that all the Indian banks are facing the challenge

of NPAs and intensity of NPAs is much higher in Public Sector Banks. It shows that

earlier Public Sector’s NPAs was more as compared to Public Sector Banks. However,

now it has been managed at lower end.

Shalini H. S. (2013)43 makes an attempt to study the effect of different variables

on the non performing farmers, as the main objective of our study is to know what are

the difficulties faced by our Indian farmers in paying back the borrowed amount with

regular payment of interest. We have used both the data collection methods and

Telephonic interview method to collect sufficient information. Apart from these methods

we have also used the chi square analysis test in order to know whether these variables

have an effect on the nonpayment of interest. I have also tried to find out, are there any

significant differences in our study? If yes, what is their significance level? In order to

make my study more accurate the author considered 1% level of significance. After the

study suggestions are given as to how the NPA’s can be minimized by considering the 5

main functions of Management.

Siraj K.K. and Sudarsanan Pillai P. (2013)44 investigate the growth of selected

NPA variables and compare it with banking performance indicators. The authors utilized

the growth rate measured using exponential growth equation to estimate the relative

efficiency of different bank groups in India. The estimation using EG value is more

accurate since variables used in this study showed non-linear movements. Variables

that impact NPA of banks is assessed and based on its growth rate, inference is

generated. The analysis focused on identifying relative efficiency of different bank

groups in managing their NPA. The findings revealed relative efficiency of public sector

banks, which of course may be judged as the major reason for the resilience of Indian

banking towards financial crisis.

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