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| Present Scenario of Non Performing Assets of Leading Public and Private Sector Banks in Assam: A Comparative Study | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paper Id :
15826 Submission Date :
14/04/2022 Acceptance Date :
20/04/2022 Publication Date :
25/04/2022
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| Abstract | Non Performing assets which fail to generate income for the lender is considered as a burning issue ofconcern for both the public as well as private sector banks. It adversely impacts the national economy as well as liquidity position of banks. Managing and controlling of NP A is highly important in present economic scenario. The present paper is based on the secondary data from Reserve Bank of India's website, State Level Banker's Committee; North East region, and other academic resources, tried to analyze the critical performance area of the banking sector as the level of NP A how affects the profitability of the banking sector of Assam. Apart from this it also focuses on the reason behind NPA, and its impact on the banking operation and identify the problem area faced by banking sector of Assam. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Keywords | Non Performing Assets, Public Sector Banks, Private Sector Banks, Profitability. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introduction |
In the year 1968, an evolutionary biologist by education Garrett Hardin paper titled "The Tragedy of the Commons" had struck the world of overpopulation. Following this, in the year of 1970 another paper of "Lifeboat Ethics: The Case Against the Poor" explained that the rich countries like USA are in the lifeboat amidst of a ocean and the poor countries are swimming in the ocean. During the 1970s, Although Western commercial Bank and IMF are distinct entities; they work together in close cooperation. They had loaned billions of recycled petrodollars to the developing countries, usually at variable, or floating, interest rates. In between 1973 and 1980, the economies of oil-importing third world countries grew an average of 4.6%, compared with 2.5% for the industrial world.
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| Aim of study | 1. Find out trends in NPA Level of Assam; 2. Highlight the NPAs position of selected Public sector banks and Private sector Banks of Assam; 3. Assess the comparative position of NPA in selected Public sector banks &Private Banks of Assam. 4. Assess the variation ofNPA ratio in selected Public Sector Banks & Private banks of Assam. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Review of Literature |
Hardin feels that if these institutions and government Helping those countries then America would also drown. On the contrary the IMF and Bank's activities have increasingly depicted the utilisation and realised that the pace of economic and social development accelerates only when sound underlying financial and economic policies are in place. In the contemporary era McKinnon & Shaw(1973) also pointed out that there exists a strong positive correlation between financial development and economic growth of a country and argued that credit is the engine of growth. But credit problem led to face another problem which in Non performing loan in this sector.
In India Narashimham Committee's contemplation in boosting up the banking sector defected by the economic depression of 1991 leads to classify the assets structure in two types- performing and non performing assets. The committee had pointed out that lending to the priority sector is one of the main reasons in enhancement of the problem of non-performing assets. Further in the later period they also added the poor credit analysis, favoured loan and variability in the economic cycle also some of the factors in the formation of high rate ofNPA of the banking sector. This paper focuses on the reason behind NPA, and its impact on the banking operation and identify the problem area faced by banking sector of Assam. |
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| Methodology | The paper written with descriptive research design for the analysis and it is essentially a fact finding approach. This is aims to explain the behavior and characteristics of an individual or group characteristics and to determine the frequency with the same things occurs. |
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| Analysis | The first quarter of 2017-18 depicted Gross NPA ofIndian
banks' as Rs. 8.29 lakh Crores and showed in the second quarter as Rs. 8.40
lakh crore which was not a surprised growth i.e., 1.31 %,as because the
advances to public in 2008 was 18 lakh crore which turned upto 54 lakhs crore
in the year 2014 in India, whereas in the financial year 2007-08 stressed
advances of Public sector banks as a share of total advances was 3.5% and it
led to 15.6 % in the year 2016-17. On the other hand, the private sector banks
stressed advances as a share of total advances was 4.2 % in the financial year
2007-08 and it led to 4.6% upto the year 2016- 17( Reserve bank of India,2017).
Between March 2008 and March 2017, the stressed advances of banks increased
from 3.5% to 12.5%. The economy in Assam is wholly priority sector based and it is tremendous importance because it has vital supply and demand links with other part of the country. Therefore, the procyclicality analysis has much importance in contrasting between the public and private sector banks and their contribution towards priority sector lending. 1. Total Priority Sector Advances Made By Public Sector Banks and Private Sector Banks In Assam: (RS. IN LAKHS)
2.
Credit Deposit Ratio of Public Sector Banks and Private Sector Banks In
Assam:
Source: State Level Banking
Committee, Assam The
advances made by PSB in the year 2014 as compared to 2013 had been increased by
7% whereas the PVT banks' advances had increased to 93% in the year
2014.Gradually it can be seen that the advances rose to 22% and in the year
2016 the advances of private sector banks increases by 197%. In the year 2017
the advances to public sector banks declined by 63%. In this specific period
the credit deposit ratio of these types of banks presents an interesting
depiction. The C/O Ratio of private banks increases tol09.34 from 61.24 from
the previous period and public sector banks got 41.81 from 38.33.1n the year
2018 the total advances of public sector banks had risen up to 63% than 2013.
The private sectors advances had risen up to 1120% from the year 2013 -2018.
The C/O ratio of the private sector banks also has increased upto 90.16 from
36.01 from the year 2013 to 2018. But it has a very low fluctuation in the
public sector banks in the C/O Ratio. It indicates that private sector banks
facing the more financial risk in its operation. In the year of 20 12-2013 the
total number public sector banks stood as was 1172 with total aggregate
deposits of Rs. 6421146.81 lakhs and aggregate advances of Rs. 2603658.31 with
C/O ratio of 40.55 contrast to 1485 public sector banks with aggregate deposits
of Rs. 10533695.98 lakhs and aggregate advances ofRs. 4468858.17 with C/O ratio
of 42.42 in the year 2017-2018, whereas the total number of private sector
banks stood as 134 in the year of 2012-2013 with total aggregate deposits of
Rs. 378972.08 lakhs and aggregate advances of Rs. 136465.83 with C/O ratio of
36.01 contrast to 330 private sector banks with aggregate deposits of Rs.
1667393.46 lakhs and aggregate advances of Rs. 1503399.29 with C/O ratio of 90.16
in the year 2017-18. 3.
Table showing total and segregated percentage of outflow and their Gross
Nonperforming Assets of public sector banks towards different priority sectors
of Assam:
4.
Table showing total and segregated percentage of outflow and their Gross
Nonperforming Assets of public sector banks towards different priority sectors
of Assam:
In
the year 2013 the public sectors banks' advances towards priority sector
lending was 53.94% of the total advances in Assam which includes total 20
public sector banks. The private sector banks includes HDFC, Federal Bank,
ICICI bank, Axis Bank and Kotak Mahindra bank of Assam. In the next year i.e.
2013-14, the two banks added Indusind bank, South Indian bank and from the
report it is seen that Indusind bank stood the second position on the total
outstanding of priority sector advances following the HDFC bank with 31958.93
lakhs which is 55576.16 lakhs ofHDFC bank. The fluctuation in the Gross NPA
with respect to advances is little in the case of public sectors banks and it
showing nothing any volatility in the private sector banks in Assam. But the
State Level Banking Committee report disclosed about the fact that private
sector banks hesitate to present the NPA report in a financial year for which
it is very tough to make any inference about the GNPA of private sector banks
in Assam. In the first few days of September(20 18) the private bank from the
aspect of market capitalization HDFC banks had the Rs. 550,915.33 crore in
India and State Bank of India had total Rs. 263,230.71 crores market
capitalisation were in the highest position from Private and public sector
banks. In Assam the GNPA rate in the year 2017-18 of SBI had 6% and HDFC bank
had 2% in different bank branches of these two banks. According to Indian
Express news paper published in the month of May, 2018 it is said that ICICI
Bank in top position of the NPA list with Rs 54,063 crore in bad loans at
India. It has recorded a 514 per cent jump in NPAs in five years - from Rs
10,506 crore in FY 2013-14 to Rs 54,063 crore in March 2018. But the SLBC
report, Assam doesn't depict any stressed assets information about ICICI, Axis
bank and about some new bank on Assam from the yearly period. It shows a stable
GNP A rate in the trend. The
year 2015-2016 declared as the year of agriculture as in that year it is
analysed that more than 75% of the population constituted by people of Assam
getting support from the agriculture. 5.
Table showing percentage of different sectors (comprised by the priority
sector) in the contribution of Gross State Domestic Product of Assam:
Sources: compiled through
different reports of Economic Survey of Assam. As it is shown in the table the contribution of agriculture to State GDP declined from the year 2014 and again it is constant in the year 2017 and 2018. The economic survey of Assam 2014-15 the growth rate of agriculture sector has been slashed down due to the rainfall deficient which affects the Kharif season crops. As per estimates during the year 2016-17, the total area under paddy cultivation was declined to 24.67 lakh hectares from 24.85 lakh hectares in 2015-16. The area for paddy cultivation in 2016-17 was estimatedat 92.5% of the total area under food grain in the State as compared to 92.61 % in 2015-16 and due to flood problem the people diversified their way of livelihood in the state. The contribution of industrial sector of the state though declining, there are 45509 SSI/MSME units in Assam and provided employment to 2.69 lakh persons till the end of 2016-17 compared to 39028 SSIIMSME units in Assam and provided employment to 2.16 lakh persons till the end of March 2014. In the year 2013-2014 the total percentage of advances of public sector banks towards industrial sector was 12.58% and private sector was 17.32%. Therate of advances increases to 20.05% of the public sector banks and private banks increased to 32.2% of the total advances in the year 2017-1S. According to the economic survey of 2017-1S report during the period 2011-12 to 2016-17(QE) the share of service sector had increased from 43.97% to 45.51 % which are contributed by the rapid diversification of communication sector, growing services of Banking & Insurance, steady growth of real estate, ownership dwelling and business services in the State. The advances towards service sector of public sector banks has been declining from the year 2013 to 2016 and it has been increasing and private sector banks advances towards service sector diminishes steadily after 2015-2016. |
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| Conclusion | In the future, India to build a robust and well capitalised banking system needed to keep provision for extend credit and incentive method for efficient and productive allocation of resources. For that improving the governance and make the institutions more powerful. Fact said in China, reform of banking sector mostly focused on strengthening regulation and supervision of the banks besides recapitalisation. This leads to make the banks more transparent in its affairs and improving more the corporate governance. On the other hand, competition among both the public and private sector will also boost the performance of banks but it should not affect the credit deposit ratio of banks. More entry of private banks will also help limit exposure to Assam economy of the public sector banks. In the long run, this competition will raise the productivity and profitability of both the sector. As NPA would destroy the current profit, interest income due to large provision of the NP A, and would affect the smooth functioning of the recycling of the funds. So, public sector banks are more efficient than private sector with regard to the management of nonperforming assets. Even among private sector bank, older are more efficient with skill of the management but efficient management ofNPA is not the sole factor that determines the overall efficiency of banks. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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