A

PROJECTREPORTON

“
ASt
udyont
heFact
orsResponsi
blef
orNPA’
soft
he
Nati
onali
zedBanks”
Submi
tt
ingpar
ti
alFul
fi
ll
mentf
ort
her
equi
rementf
ort
hedegr
eeof

Mast
erofBusi
nessAdmi
nit
rat
ion(
MBA)

To

RASHTRASANT TUKDOJIMAHARAJNAGPURUNI
VERSI
TY,
NAGPUR

Submi
tt
edBy

Mr
.Abhi
j
eetDeol
ikar

M.
B.A.Fi
naly
ear

Undert
hegui
danceof

Pr
of.Har
shi
tBhur
se

Rani
baiAgni
hot
riI
nst
it
uteofComput
erScience& I
nfor
mat
ion
Technol
ogy
,Wardha

(
2020-
21)

1
 CERTI
FICATE

Thisistocertif
yt hatt hepr ojectrepor tentitl
ed“ASt udy
ont heFact orsResponsi blef orNPA’ soft heNat i
onali
zed
Banks”pr oj
ectreportSubmi t
tedbyMr .Abhi jeetDeolikara
parti
al ful
fi
lmentforther equirementmast erofbusi ness
admi nistr
ati
onex aminat i
onoft heRasht rasantTukadoj i
Mahar ajNagpurUniversity,Nagpur .FortheAcademi cSession
2020- 21isanor i
ginalcar ri
edoutundert hesuper vi
sionand
guidanceofPr of
.Har shitBhur seandhasunder gonethe
requisitedurati
onaspr escribebyt heRasht rasantTukadoj i
Mahar ajNagpurUniver sity,Nagpurf orthepr ojectwor k.

Pr
of.Har
shi
tBhur
se Dr
.Smi
taKal
orkar

Pr
ojectGui
de H.
O.D

Dat
e:

Pl
ace:War
dha

2
 DECLARATI
ON

Iherebydecl arethatthisprojectrepor tentit

led, “ASt udy
ontheFact orsResponsi bl
eforNPA’ soft heNat ionalized
Banks”Submi ttedt otheRTMNU, Nagpur .Isarecor dofan
ori
ginalwor kdonebymeundert hegui danceofpr of.Harshit
Bhurse.Rani bai AgnihotriI
nsti
tuteofComput erSci ence&
Inf
ormat i
onTechnol ogy,Wardha.Thispr ojectwor ki s
submi tt
edt oRTM NagpurUni ver
sity,Nagpuri nthepar t
ial
ful
fi
lmentofr equirementoft hedegr eeofmast erofbusi ness
administrati
on.Ther esultembodiedi nthi sprojecthav enot
beensubmi tt
edbymet omayot herUni versit
yori nstitut
ef or
theawar dofanydegr ee.

Dat
e: Mr
.Abhi
jeetDeol
ikar

Pl
ace:War
dha M.
B.A.SEM -
IV

3
 ACKNOWLEDGEMENT
Duri
ng thepreperati
on andwr i
ti
ngoft hi
sprojectwor k,
t
hegoodwi shesandact i
vehelphaveblessedmef rom avery
l
argenumberofpeopl e’s.Thementionofallofthesepeople’s
i
swel lhi
ghi mpossi
bleher eatthi
st i
me.Howev er,Ican’tbut
menti
onaf ewofthem forwhom Iam ex t
remelygrateful
.

Iam ext r
emel ygrat
efultopr of.Harshi
tBhur sewithout
whoseabl eguidancethi
spr oj
ectreportwouldneverhavebeen
materi
ali
zed. I t was hi s erudite t al
k’
s, keen interest
,
knowledgeabl
eandpr act
icalsuggestionsthatinspi
redmet o
bri
ngoutthebest .

Mythanksar ealsoduet oDr .DineshMi rkute,Pr

inci
palof
RanibaiAgnihotr
iInst i
tut
eofComput erSci ence&I nfor
mat i
on
Technology,Wardha.Dr .SmitaKalorkar,H.O.D,Departmentof
ManagementSt udies,RanibaiAgnihotriInsti
tuteofComput er
Sci
ence & I nfor
mat ion Technology,War dha.And Dr .
Dinesh
Mirkute,pr
ojectinchargef orext
endingt heirgreatsupportand
i
nspirati
onthroughoutmypr oj
ectwor k.

Lastbutnotthel
east;Iwouldl
i
ketothankmyf ami
l
yand
f
ri
endsforthei
rconst
antencour
agementandsuppor
t.

Mr
.Abhi
jeetDeol
ikar

M.
B.A Semest
erI
V

Dat
e:
Pl
ace:War
dha

4
 I
NDEX

Sr. cont
ent page
no. no.
1. I
ntr
oduct
iont
otopi
c
Theor
eti
cal
backgr
ound
CompanyPr
ofi
l
e
2. Rev
iewofLi
ter
atur
e
3. Resear
chMet
hodol
ogy
3.
1.Needoft
heSt
udy
3.
2.Obj
ect
iveoft
heSt
udy
3.
3.Hy
pot
hesi
soft
heSt
udy
3.
4.Li
mit
ati
onoft
heSt
udy
3.
5.Resear
chDesi
gn
4. Dat
aAnal
ysi
sandI
nter
pret
ati
on
5. Fi
ndi
ng,
Concl
usi
on&Recommendat
ion
5.
1.Fi
ndi
ng
5.
2.Concl
usi
on
5.
3.Recommendat
ion
Bi
bli
ogr
aphy

5
 Annext
ure

Execut
iveSummar
y
Nat
ional
i
zedbanksar
eheav
il
yst
aff
ed.Ther
ecr
uit
mentt
rai
ning,pl
acement
andpr
omot
ionpol
i
ciesoft
hebanksl
eav
emucht
obedesi
red.I
ndi
anbanki
ngsect
or
r
ecent
lyf
acedt
heser
iouspr
obl
em ofNonPer
for
mingAsset
s.Thi
spr
obl
em has
been showed l
argel
yinI
ndi
an banki
ng sect
orsi
nce t
hreedecade.Duet
othi
s
pr
obl
em manyPubl
i
cSect
orBankandPr
ivat
eSect
orBankshav
ebeenadv
ersel
y
af
fect
ed t
othei
rper
for
mance and oper
ati
ons.I
n si
mpl
e wor
d Non Per
for
ming
Asset
spr
obl
em i
sonewher
ebanksar
enotabl
etor
ecol
l
ectt
hei
rlandedmoneyf
rom
t
hecl
i
ent
sorcl
i
ent
shav
ebeeni
nsuchacondi
ti
ont
hatt
heyar
enotposi
ti
ont
o
pr
ovi
det
hebor
rowedmoneyt
othebanks.
I
thasbeengr
eatl
ear
ningexper
ienceofdoi
ngt
hepr
ojectwor
k,i
tgav
eamuch
mor
ethi
ngst
olear
nandmakemegi
vemywhol
eef
for
tsf
orsuccessf
ulcompl
eti
on
oft
hepr
oject
.Peopl
euseav
ari
ousser
vicespr
ovi
dedbybankandt
hati
sver
yhel
pful
f
ort
hecust
omer
s.Peopl
ewhowantt
ost
artt
hei
rownbusi
ness;
theyal
sost
artt
hei
r
busi
nesssuccessf
ull
yduet
o Bank.And mosti
mpor
tantt
hing i
sthatser
vices
pr
ovi
dedt
oospeci
all
ytof
armerwhi
cht
urnedoutt
obeext
remel
yfr
uit
fulf
ort
hem.
Thef
armer
sincr
easedt
hei
ragr
icul
tur
ebusi
nessbyusi
ngmostef
fect
ivet
echni
ques
andi
nst
rument
swhi
chwer
eacqui
redonl
oanbasi
sfort
hei
rbusi
nessgr
owt
h.
Fi
rstofal
lthei
nfor
mat
ionr
egar
dingt
hebanki
ngi
ndust
ryi
sgi
ven.I
nthose
v
ari
ouspar
ti
cul
arsr
egar
dingt
hebank,t
hei
ndust
ryi
sbei
ngpr
ovi
dedandal
somany
t
ypesofNon-
per
for
mingasset
s.Thei
ntr
oduct
ionofNon-
per
for
mingasset
sisgi
ven.
I
nthepr
ojectr
esear
cherhav
etr
iedt
oshow t
her
easonswhyNPA ofbanksi
s
i
ncr
easi
ng,whatar
ether
eason,andmanymor
ethi
ngsl
i
kedeposi
tsgr
owt
hreason,
decr
easeofadv
anceet
c.Thi
spr
ojecti
sai
medatunder
standi
ngt
hev
ari
ousr
easons
f
orhi
ghl
evelNPA’
s.Thest
udyoft
hepr
ojectal
sof
ocusesonNon-
per
for
mingasset
s
andf
act
orr
esponsi
bleofNPA’
s.

6
 “
ASt
udyont
heFact
orsResponsi
blef
orNPA’
soft
he
Nat
ional
izedBanks”
.
Chapt
er1
1.
1Int
roduct
ionoft
heSt
udy
NPA’
sar
eanyassetofabankwhi
chi
snotpr
oduci
nganyi
ncome.NPA’
sar
e
becomi
ng v
eryser
ious pr
obl
em f
ornat
ional
i
zed banks because i
taf
fect
sthe
f
inanci
alposi
ti
onofbanks.Oneoft
hemosti
mpor
tantpr
obl
emsofNPAi
nbanki
ng
sy
stem t
hatdayt
odayNPA’
sar
eincr
easi
ng.Themaj
orr
iskt
obanksi
sther
iski
n
badl
oans.Thi
spr
ojectal
sof
ocusesont
her
easonbehi
ndt
heNPAandi
tsi
mpacton
banki
ngoper
ati
ons.I
nthi
sst
udywhyt
hebanksNPA’
shav
eincr
eased?Howt
oav
oid
NPA‘
sinI
ndi
anBanks?Whatar
etheef
fect
sofI
ndi
anEconomy
?Thr
ought
hisst
udy
suchquest
ionswi
l
lbeanswer
ed.Thepr
ojectt
hati
sinv
olv
esPr
ivat
eSect
orBank
andPubl
i
cSect
orBanksi
ntheI
ndi
a.I
nthi
sst
udyIhav
eanal
yzedt
heNPAi
ssue
whi
chi
soneoft
hebi
ggestpr
obl
emst
hatt
heI
ndi
anbanksar
efaci
ngt
oday
.

Whati
sNPA(
NonPer
for
mingAsset
s?)

NPAmeansi
fanybankgi
vesl
oant
othecust
omeri
fthei
nter
estf
ort
hatl
oan
i
snotpai
dbyt
hecust
omerf
or90day
sthent
hataccounti
scal
l
edNPA.Non-
Per
for
mingAsset
sar
eal
socal
l
edasNon-
Per
for
mingLoans.I
tismadebyabankor
f
inancecompanyonwhi
chr
epay
ment
sar
enotbei
ngmadeont
ime.Al
oani
san
assetf
orabankast
hei
nter
estpay
mentandt
her
epay
mentoft
hepr
inci
palcr
eat
e
st
rengt
hofcashf
lows.I
tisf
rom t
hei
nter
estpay
mentt
hatabankmakesi
tspr
ofi
ts.
Banksusual
l
ytr
eatasset
sasnon-
per
for
mingi
ftheyar
enotser
vicedf
orsomet
ime.
I
fpay
ment
sar
elat
eforashor
tti
me,al
oani
scl
assi
fi
edaspastdueandoncea
pay
mentbecomes r
eal
l
ylat
e(usual
l
y90 day
s)t
he l
oan i
s cl
assi
fi
ed as non-

7
per
for
ming.Ahi
ghl
evelofnon-
per
for
mingasset
,compar
etosi
mil
arl
ender
smaybe
asi
gnofpr
obl
ems.

Exampl
eofNPA
Forexampl
e,CompanyXYZhast
akenal
oanof$100mi
l
li
onf
rom BankABCD
onwhi
chi
tneedst
opay$10,
000ofi
nter
estev
erymont
hfor5y
ear
s.Now i
fthe
bor
rowerdef
aul
tsont
hepay
mentf
ort
hreeconsecut
ivemont
hs90day
sthent
he
bankneedst
ocl
assi
fyt
hel
oanasaNon-
per
for
mingasseti
nthei
rbal
ancesheetf
or
t
hatf
inanci
aly
ear
.

I
mpor
tanceofNPA
I
tisi
mpor
tantf
orbot
hthebor
rowerandt
hel
endert
obeawar
eofper
for
ming
v
ersusnon-
per
for
mingasset
s.Fort
hebor
rower
,ift
heasseti
sNon-per
for
mingand
i
nter
estpay
ment
sar
enotmade,i
tcannegat
ivel
yaf
fectt
hei
rcr
edi
tandgr
owt
h
possi
bil
i
ties.I
twi
l
lthenhampert
hei
rabi
l
ityt
oobt
ainf
utur
ebor
rowi
ng.

Ty
pesofNon-
Per
for
mingAsset
s:
1.St
andar
dsAsset
s:
Thel
oanaccount
swhi
char
eregul
aranddonotcar
rymor
ethannor
malr
isk.
Wi
thi
nst
andar
dasset
s,t
her
ecoul
dbeaccount
swhi
cht
houghhav
enotbecome
NPAbutar
eir
regul
ar.Suchaccount
sar
ecal
l
edasspeci
alment
ionaccount
s.
2.SubSt
andar
dsAsset
s:
Subst
andar
dsasset
sisonewhi
chhasbeenr
emai
nedNPAf
oraper
iodl
ess
t
hant
o12mont
hs.Anassetwhi
chi
sov
erduef
oraper
iodofmor
ethan90day
s
butl
ess12mont
hs.
3.Doubt
fulAsset
s:
Adoubt
ful
asseti
sonewhi
chhasbeenNPAf
ormor
ethan12mont
hs.Anasset
woul
dbecl
assi
fi
edasdoubt
fuli
fithasr
emai
nedi
nthesubst
andar
dcat
egor
y
f
oraper
iodof12mont
hs.
4.LossAsset
s:
Al
ossasseti
sonewher
elosshasbeeni
dent
if
iedbyt
hebankori
nter
nalor
ext
ernalaudi
tor
sort
heRBIi
nspect
ionbutt
heamounthasnotbeenwr
it
tenof
whol
l
y.I
not
herwor
ds,suchasasset
sisconsi
der
eduncol
l
ect
ibl
eandofsuch

8
 l
i
ttl
eval
uet
hati
tscont
inuanceasbankabl
easseti
snotwar
rant
edal
though
t
her
emaybesomesal
vageorr
ecov
erabl
eval
ue.
Fact
orResponsi
blef
ort
heNPA’
s
 Ext
ernalf
act
orsl
i
ker
aw-
mat
eri
alshor
tage,r
aw-
mat
eri
al/
Inputpr
iceescal
ati
on,
powershor
tage,i
ndust
ri
alr
ecessi
on,excesscapaci
ty,nat
uralcal
ami
ti
esl
i
ke
f
loods,
acci
dentet
c.
 Di
ver
sionoff
undsf
orexpansi
on/
moder
nizat
ion/
set
ti
ngupnewpr
oject
s.
 Ti
me/
costov
err
unwhi
l
eimpl
ement
ingpr
oject
 Busi
nessf
ail
uresl
i
kepr
oductf
ail
i
ngt
ocapt
uremar
ket
,inef
fi
cientmanagement
,
st
ri
ke/
str
ainedl
aborr
elat
ions,wr
ongt
echnol
ogy
,techni
calpr
obl
em,pr
oduct
obsol
escence.
 Fai
l
ure,non-
pay
ment
/ov
erduesi
not
hercount
ri
es,r
ecessi
oni
not
hercount
ri
es,
ext
ernal
i
zat
ionpr
obl
ems,
adv
erseexchanger
ate.
 Gov
ernmentpol
i
ciesl
i
keexci
se,
impor
tdut
ychanges,
der
egul
ati
on,
andpol
l
uti
on
cont
rol
order
s,et
c.

Reasonsf
orHi
ghLev
elofNPA’
s
 Peopl
eint
heagr
icul
tur
alsect
orwer
ehar
dlyi
nter
est
edi
nret
urni
ngt
hel
oansas
t
heywer
econf
identt
hatt
hel
oanswi
tht
hei
nter
estwoul
dbewr
it
tenof
fbyt
he
successi
vegov
ernment
.
 Lackofcoor
dinat
ionbet
weenpr
ivat
esect
orbanksandpubl
i
csect
orbanks.
 Changei
neconomi
cpol
i
ciesandgov
ernment
.
 Lackofpr
opermoni
tor
ing.
 Lackofaccount
abi
l
ity
.
 Fai
l
ureoft
hebusi
nessi
nwhi
cht
hel
oanwasbei
ngusedi
sal
soamaj
orr
eason
f
orNPA’
s.

I
mpactofNon-
per
for
mingAsset
s:
 Low Pr
ofi
tabi
li
tyDueToNPA:Non-
per
for
mingAsset
snotonl
yreducest
he
pr
ofi
toft
heBankbutal
soi
ncr
easest
hel
oss.Al
sobankpr
ovi
dingI
mpactt
he
pr
ofi
tabi
l
ityoft
heBank.
 Li
abi
li
ty:Duet
ohi
ghNon-
per
for
mingAsset
sBankf
orcedf
orl
ower
sthei
nter
est
r
atesoft
hedeposi
tand onadv
ancel
i
kel
yto payhi
gheri
nter
estr
ateson

9
 adv
ance.
 Shar
ehol
derLoose Conf
idence:Hi
gh Non-
per
for
ming Asset
sreduced t
he
conf
idencel
evelf
ort
hei
nvest
orwhi
chsi
gni
fi
cant
lyi
mpact
stheshar
epr
iceof
t
hebanki
nthi
ssi
tuat
ion,banki
nthi
ssi
tuat
ion,bankst
oppay
mentoft
he
di
vi
dendt
otheshar
ehol
der
,whi
chwasnoti
nthei
nter
estofi
nvest
or.
 Publ
ic Conf
idence atSt
ake:The poorper
for
mances oft
he bank due t
o
i
ncr
easesi
nNon-
per
for
mingAsset
snotonl
ylowert
hesent
imentoft
hei
nvest
or
butt
hebankal
sol
ostt
hef
ait
hofpubl
i
c,t
hisdi
rect
lyaf
fect
sthedeposi
tint
othe
bank,
HighNon-
per
for
mingAsset
saf
fect
stheeconomyasawhol
e.
 Capi
talI
nadequacy
:Banksar
erequi
redt
omai
ntai
nadequat
ecapi
talonr
isk
wei
ght
edasset
sonagoi
ngbasi
s.Ev
eryi
nNon-
per
for
mingAsset
slev
eladdr
isk
wei
ght
edasset
swar
rantt
hebankt
oshowhert
her
ecapi
talbasef
urt
her
.Capi
tal
hasapr
icet
agr
angi
ngf
rom 12%t
o18%.
 Undet
ermi
nedBank’
sImage:I
ncr
easei
nnon-
per
for
mingasset
swhi
chshadows
t
he domest
ic mar
ketand gl
oball
evelmar
ket
s,on t
hatsi
tuat
ion t
he bank
pr
ofi
tabi
l
itydecr
easeswhi
chl
eadt
othebadi
maget
obanks.
 Ef
fect
sFundi
ng:I
ncr
easei
nnon-
per
for
mingasset
sleadst
oscar
cit
yinf
undi
ng
t
oot
herbor
rower
s.Aswel
last
heI
ndi
ancapi
talmar
ketal
sogetaf
fect
ed,and
t
hent
her
ewi
l
lbeonl
yaf
ewbanki
ngi
nst
it
uti
onsl
endmoney
.

10
1.
2AboutCompany

Pr
ivat
eSect
orBanks:
HDFCBank:
HDFCBanki
sanI
ndi
anbanki
ngandf
inanci
alser
vicescompanyheadquar
ter
s
i
nMumbai
.HDFCBanki
sIndi
a’
slar
gestbankpr
ivat
esect
orl
enderbyasset
s.HDFC
Bankpr
ovi
desanumberofpr
oductandser
vicei
ncl
udi
ngwhol
esal
ebanki
ngr
etai
l
banki
ng,t
wowheel
erl
oanper
sonall
oan,andcr
edi
tcar
dandal
ongwi
tht
hisv
ari
ous
di
git
alpr
oduct
sar
ePayAppandsmar
tbuy
.In1994HDFCBankwasi
ncor
por
ated
wi
thi
tsr
egi
ster
edof
fi
cei
nMumbaiI
ndi
a.Theequi
tyshar
esofHDFCBankar
eli
sted
ont
heBombayst
ockexchangeandnat
ional
stockexchange.
HDFCi
sIndi
a’
spr
emi
erhousi
ngf
inancecompanyandenj
oysani
mpeccabl
e
t
rackr
ecor
dinI
ndi
aaswel
lasi
nint
ernat
ionalmar
ket
s.Si
ncei
ncept
ioni
n1977,t
he
Cor
por
ati
onhasmai
ntai
nedaconsi
stentandheal
thygr
owt
hini
tsoper
ati
onst
o
r
emai
nthemar
ketl
eaderi
nmor
tgages.I
tsout
standi
ngl
oanpor
tfol
i
ocov
erswel
l
ov
erami
l
li
ondwel
l
inguni
ts.HDFC hasdev
elopedsi
gni
fi
cantexper
ti
sei
nret
ail
mor
tgagel
oanst
odi
ff
erentsegmentandal
sohasal
argecor
por
atecl
i
entbasef
or
i
tshousi
ngr
elat
edcr
edi
tfaci
l
iti
es.Wi
thi
tsexper
iencei
nthef
inanci
almar
ket
s,a
st
rongmar
ketr
eput
ati
on,l
argeshar
ehol
derbase,HDFCwasi
deal
l
yposi
ti
onedt
o
pr
omot
eabanki
ntheI
ndi
anenv
ironment
.HDFC Bankof
fer
sdeposi
tschemes,
cr
edi
tcar
ds and secur
ed and unsecur
ed l
oans l
i
ke home l
oan,busi
ness l
oan,
per
sonal
loan,
loanagai
nstpr
oper
ty.
 LowestHDFCBankhomel
oani
nter
esti
s8.
00%.
 Lowi
nter
estper
sonal
loanonHDFCBankst
art
sat10.75%.
 HDFCBankof
ferl
oanagai
nstpr
oper
tyatal
owr
ateof%.
 Hi
ghestf
ixdeposi
tint
erestof
fer
ed byHDFC Banki
s6.
50% perannum on
deposi
ts.
 HDFCBankof
fer
shi
ghr
etur
nsupt
o6.
50%onr
ecur
ri
ngdeposi
t.

11
 I
tcur
rentMCLRRat
eis7.
95%whi
chhasl
astr
evi
sedon07Apr
il2020.

HDFCBankCSR
Muchbef
orecor
por
atesoci
alr
esponsi
bil
i
ty(
CSR)cont
ri
but
ionwer
emade
mandat
orybyt
hecompani
esact2013,HDFCBankwasf
oll
owi
ngboar
dappr
oved
t
arget
sandcont
ri
but
ingt
osoci
alcauses.HDFCBankCSRspendwasi
nner443.
8
cor
ersdur
ingt
hey
earendi
ng31Mar
ch,2019,bet
ter
ingt
heFY18per
for
manceby
20%,
accor
dingt
othecompany
’si
ntegr
atedannual
repor
t.

Pr
omot
er:
HDFCi
sIndi
a’
spr
emi
erf
inancecompanyani
mpeccabl
etr
ackr
ecor
dinI
ndi
a
aswel
lasi
nint
ernat
ionalmar
ket
s.Si
ncei
tsi
ncept
ioni
n1977,t
hecor
por
ati
onhas
mai
ntai
nedaconsi
stentandheal
thygr
owt
hini
tsoper
ati
onst
oremai
nthemar
ket
l
eaderi
nmor
tgages.I
tsout
standi
ngl
oanpor
tfol
i
ocov
erswel
lami
l
li
ondwel
l
ing
uni
ts.

Busi
nessFocus:
HDFCBanksmi
ssi
oni
saWor
ldCl
assI
ndi
anBank.Theobj
ect
ivei
stobui
l
d
sound cust
omerf
ranchi
se acr
oss di
sti
nctbusi
ness so as t
o be t
he pr
efer
red
pr
ovi
derofbanki
ngser
vicef
ort
argetr
etai
landwhol
esal
ecust
omersegment
s,and
t
oachi
eveheal
thygr
owt
hinpr
ofi
tabi
l
ity
,consi
stentwi
tht
hebank’
sri
skappet
it
e.
Thebanki
scommi
tt
edt
omai
ntai
nthehi
ghestl
evelofet
hicalst
andar
ds,
pr
ofessi
onali
ntegr
it
y,cor
por
ate gov
ernance and r
egul
ator
y compl
i
ance.HDFC
Banksbusi
nessphi
l
osophyi
sbased i
nfi
vecor
eval
uesoper
ati
onalexcel
l
ence,
cust
omerf
ocus,
productl
eader
shi
p,peopl
eandsust
ainabi
l
ity
.

Di
str
ibut
ionNet
wor
k:
HDFCBanki
sheadquar
ter
edi
nMumbai
;theBanksdi
str
ibut
ionnet
wor
kwas
5,
314br
anchesacr
oss2,
768ci
ti
es.Al
lbr
anchesar
eli
nkedonl
i
neonar
ealt
ime
basi
s.Cust
omeracr
ossI
ndi
aisal
soser
vicedt
hroughmul
ti
pledel
i
ver
ychannel
s
suchasPhoneBanki
ng,NetBanki
ng,Mobi
l
eBanki
ng,andSMSbasedbanki
ng.The
bankexpansi
onpl
anst
akei
ntoaccountt
heneedt
ohav
eapr
esencei
nal
lmaj
or
i
ndust
ri
alandcommer
cialcent
ers,
wher
eit
scor
por
atecust
omerar
elocat
ed,
aswel
l

12
ast
heneedt
obui
l
dast
rongr
etai
lcust
omerbasef
orbot
hdeposi
tandl
oanpr
oduct
s,
bei
ngacl
ear
ingbankst
ovar
iousl
eadi
ngst
ockexchange.Thebankal
sohasa of
13,
514 AMTsacr
ossI
ndi
a,HDFC BankATMsnet
wor
kcanbeaccessed byal
l
domest
icandi
nter
nat
ionalVi
sa/Mast
erCar
d,Vi
saEl
ect
ron/Maest
ro,Pl
us/Ci
rr
us
andAmer
icanExpr
essCr
edi
t/Char
gecar
dhol
der
s.

Technol
ogy
:
HDFC Bank oper
ates i
n a hi
ghl
y aut
omat
ed env
ironmenti
nter
ms of
i
nfor
mat
iont
echnol
ogyandcommuni
cat
ionsy
stems.Al
lthebank’
sbr
ancheshav
e
onl
i
neconnect
ivi
ty,whi
chenabl
est
hebankofof
ferspeedyf
undst
ransf
erf
aci
l
iti
es
t
oit
scust
omer
s,Mul
ti
-br
anchaccessi
sal
sopr
ovi
dedt
oret
ailcust
omer
sthr
ough
t
hebr
anchnet
wor
kandAut
omat
edTel
l
erMachi
nes(
ATMs)
.
Thebankhasmadesust
ainabl
eef
for
tsandi
nvest
menti
nacqui
ri
ngt
hebest
t
echnol
ogyav
ail
abl
eint
ernat
ional
l
y,t
obui
l
dthei
nfr
ast
ruct
uref
orawor
ldcl
assbank.
I
nter
m ofcor
ebanki
ngsof
twar
e,t
hecor
por
atebanki
ngbusi
nessi
ssuppor
tedby
Fl
excube;
whi
l
etheRet
ail
Banki
ngbusi
nessbyFi
nwar
e,bot
hfr
om I
-f
lexSol
uti
onLt
d.
Sy
stem ar
eopen,
scal
eabl
eandweb-
enabl
ed.

Publ
icSect
orBanks
Punj
abNat
ionalBank:

Punj
abNat
ionalBanki
sPSU wor
kingunderCent
ralGov
ernmentofI
ndi
a
r
egul
atedbyRBIAct
,1934andBanki
ngRegul
ati
onAct
,1949.Punj
abNat
ionalBank
wasr
egi
ster
edon19May1894undert
heI
ndi
anCompani
esAct
,wi
thi
tsof
fi
cei
n
Anar
kal
iBazaar
,Lahor
e,i
npr
esentdayPaki
stan.Thef
oundi
ngboar
dwasdr
awn
f
rom di
ff
erentpar
tsofI
ndi
apr
ofessi
ngdi
ff
erentf
ait
hsandofv
ary
ingback-
ground
wi
th,t
hecommonobj
ect
iveofcr
eat
ingat
rul
ynat
ionalbankt
hatwoul
dfur
thert
he
economi
cint
erestoft
hecount
ry.Punj
abNat
ionalBankcat
erst
oawi
dev
ari
etyof
audi
encet
hroughspect
rum ofser
vicesi
ncl
udi
ngcor
por
ateandper
sonalbanki
ng,

13
i
ndust
ri
alf
inance,andagr
icul
tur
efi
nanceandf
urt
heri
mpr
ovi
ngl
ow costdeposi
ts,
l
endi
ng t
o agr
icul
tur
e and smal
land medi
um ent
erpr
ises and r
eposi
ti
oni
ng of
subsi
diar
iesandj
ointv
ent
ures.

14
Joi
ntVent
uresofPunj
abNat
ionalBank
 Pr
inci
pal
PNBAssetManagementCompany
 Pr
inci
pal
Trust
eeCompany
 Asset
sCar
eEnt
erpr
ises
 I
ndi
aFact
ori
ngandFi
nanceSol
uti
ons.
PNBBr
anches(
Nat
ionalandI
nter
nat
ional
)
 Br
anchesi
nal
lthe7met
ropol
i
tanandcosmopol
i
tanci
ti
esi
nIndi
a
 NewDel
hi,
Mumbai
,Cal
cut
ta,
Bangal
ore,
Hyder
abadandAhmadabad.
I
thasbr
anchesi
nbot
hur
banandr
ural
areas.
 PNBi
sal
way
sfocusi
ngonexpandi
ngabr
oadandt
il
ldat
ehasi
dent
if
iedsome
emer
gingeconomi
es.Someoft
hem ar
eint
hesepl
ace:
 Al
mat
y
 Kazakhst
an
 Shanghai
 Chi
na
 London
 Kabul
 Af
ghani
stan

15
1.
3 Scopeoft
heSt
udy
 Thest
udycoul
dsuggestmeasur
esf
ort
hebankst
oav
oidf
utur
eNPA’
sandt
o
r
educeexi
sti
ngNPA’
s
 Thest
udymayhel
pthegov
ernmenti
ncr
eat
ingandi
mpl
ement
ingnewst
rat
egi
es
t
ocont
rol
NPA’
s
 Thest
udywi
l
lhel
ptosel
ectappr
opr
iat
etechni
quessui
tedt
omanaget
heNPA’
s
anddev
elopat
imeboundact
ionpl
ant
ocheckt
hegr
owt
hofNPA’
s.
 Thest
udyanal
ysest
hedi
ff
erentf
act
orst
hatcr
eat
eNon-
Per
for
mingAsset
sin
sel
ect
edsect
ors.
 Thescopeoft
hest
udyi
ncl
udesananal
yti
calst
udyofNon-
Per
for
mingAsset
sof
Publ
i
cSect
orBanksandPr
ivat
eSect
orBanks

1.
4Obj
ect
ivesoft
heSt
udy
 Toi
dent
if
ythei
mpl
i
cat
ionsoft
hef
act
orsofNPA’
sinnat
ional
i
zedbanks.
 Tost
udyt
hepar
amet
ri
calr
elat
ionshi
pamongt
hef
act
orsofi
mpl
i
cat
ionsof
NPA’
s.
 Toanal
yzet
hei
mpactofNPA’
sonbanksper
for
mance.
 Todet
ermi
net
hei
mpactofNPAonnetpr
ofi
toft
hesel
ect
edbanks.
 Tounder
standt
heconceptofNPAofPubl
i
cSect
orandPr
ivat
eSect
orbanks.
 Tot
hest
udyv
ari
ousr
easonsf
orNPAi
nPr
ivat
eSect
orbankandPubl
i
cSect
or
banks.

16
1.
5 Si
gni
fi
canceoft
heSt
udy
 Thest
udymayhel
pthegov
ernmenti
ncr
eat
ingandi
mpl
ement
ingnewst
rat
egy
t
ocont
rol
NPA’
s.
 Thest
udywi
l
lhel
ptosel
ectappr
opr
iat
etechni
quessui
tedt
omanaget
heNPA’
s
anddev
elopat
imeboundact
ionpl
ant
ocheckt
hegr
owt
hofNPA’
s.
 Thest
udycoul
dsuggestmeasur
esf
ort
hebankst
oav
oidf
utur
eNPA’
sandt
o
r
educeexi
sti
ng.
 I
tisi
mpor
tantt
ounder
standt
hei
mpactofNPA’
sonbankt
ransact
ions.
 I
nthe l
evelofNPA’
sthe mostcr
it
icalcondi
ti
on f
orbr
ingi
ng aboutan
i
mpr
ovementi
nthepr
ofi
tabi
l
ityofbanksi
sreduct
ioni
nthel
evel
ofNPA’
s.

1.
6 Hy
pot
hesi
s
H0:TheNPA’
sofPubl
i
cSect
orBanksar
ehi
ghert
hanPr
ivat
eSect
orBank.1.

1.
7Li
mit
ati
onsoft
heSt
udy
 Ascert
aini
ngexacti
mpactofNPA’
sissubj
ectt
oqual
i
tat
iveandquant
it
ati
ve
aspect
.
 Hence,anal
yzi
ngt
hei
nsi
ght
sofcausesofNPA’
sisnotpossi
bleduet
oli
mit
ed
t
ime.
 Avai
l
abi
l
ityofNPA’
sdat
aisbi
ggestl
i
mit
ati
onoft
hisst
udy
.

17
 Chapt
er2
Rev
iewofLi
ter
atur
e
Al
arge numberofr
esear
cher
s hav
e been st
udi
ed t
othe i
ssue ofNon-
per
for
mingAsset
sinbanki
ngi
ndust
ry.Ar
evi
ew oft
her
elev
antl
i
ter
atur
ehasbeen
descr
ibedasunder
:
Chaudhar
yandShar
ma(
2011)i
nthei
rresear
cherpaperonper
for
manceof
Publ
i
cSect
orBanksandPr
ivat
eSect
orBanks,st
ri
ngentmeasur
est
ogetr
idofNPA
pr
obl
em.Anef
fi
cientmanagementi
nfor
mat
ionsy
stem shoul
dbedev
eloped.Thebank
st
affi
nvol
ved i
n sanct
ioni
ng t
he adv
ances shoul
d be t
rai
ned aboutt
he pr
oper
document
ati
onandchar
geofsecur
it
iesandmot
ivat
edt
otakemeasur
esi
npr
event
ing
adv
ancest
urni
ngi
ntoNPA.Publ
i
cbankmustpayat
tent
ionont
hei
rfunct
ioni
ngt
o
compet
epr
ivat
ebank.Banksshoul
dbewel
lver
sedi
npr
opersel
ect
ionofbor
rower
andi
nanal
yzi
ngt
hef
inanci
alst
atement
.
KaurandSi
ngh(
2011)i
nthei
rst
udy
,Non-
per
for
mingasset
sofpubl
i
cand
pr
ivat
esect
orbanksst
udi
edt
hatNPA’
sar
econsi
der
edasani
mpor
tantpar
amet
ert
o
j
udget
heper
for
manceandf
inanci
alheal
thofbanks.Thel
evelofNPA’
sisoneoft
he
dr
iver
s off
inanci
alst
abi
l
ity and gr
owt
h oft
he banki
ng sect
or.The f
inanci
al
compani
esandi
nst
it
uti
onsar
enowaday
sfaci
ngamaj
orpr
obl
em ofmanagi
ngt
he
Non-
per
for
mingAsset
sast
heseasset
sar
epr
ovi
ngt
obecomeamaj
orset
backf
or
t
hegr
owt
hoft
heeconomy
.
HosmaniandHodge(
2011)conduct
edst
udyon“
Unear
thi
ngt
heEpi
demi
cof
Non-
per
for
mingasset
swi
thr
efer
encepubl
i
csect
orbanki
nIndi
a”anempi
ri
caland
descr
ipt
ivei
nnat
urewhi
chshowst
hemagni
tudeandt
rendofpubl
i
csect
orbanksi
n
I
ndi
aandf
oundt
hatt
her
eisasl
i
ghti
mpr
ovementi
ntheasset
squal
i
tyr
efl
ect
edby
decl
i
nei
nthedi
ver
seNPAper
cent
age.Thest
udyconcl
udedt
hatNPAi
sani
mpor
tant
par
amet
erf
orassessi
ng f
inanci
alper
for
mance ofbanks i
nter
m ofpr
ofi
tabi
l
ity
,
l
i
qui
dit
yandeconomi
esofscal
einoper
ati
onandbankshast
otaket
imel
yact
ion
agai
nstdegr
adat
ionofgoodper
for
mingasset
s.
Pat
idar
,S.
,Kat
ari
a,A.(
2012)t
hest
udyanal
yzedt
heper
cent
ageshar
eofNPA
ascomponent
sofpr
ior
it
ysect
orl
endi
ng,t
hecompar
ati
vest
udywasconduct
ed
bet
weenPNB andassoci
ates,Pr
ivat
eSect
orBanksandPubl
i
cSect
orBanksand
Nat
ional
i
zedBankst
ofi
ndoutt
hesi
gni
fi
cancedi
ff
erenceoft
heNPAandal
sof
indout
t
hesi
gni
fi
canti
mpactofpr
ior
it
ysect
orl
endi
ngont
het
otalNPA ofBanksusi
ng

18
st
ati
sti
cal
tool
sli
ker
egr
essi
onanal
ysi
sandr
ati
oanal
ysi
s.
Shal
ini(
2013)hasanal
yzedt
hecausesandsuggest
edr
emedi
esf
orr
educi
ng
NPA’
sinI
ndi
anpubl
i
csect
orbankswi
thspeci
alr
efer
encet
otheagr
icul
tur
alsect
or.
The anal
ysi
soft
he di
ff
erentpr
obl
em f
aced byt
he I
ndi
an f
armer
sdeducest
he
concl
usi
ont
hatbanksshoul
dfol
l
ow somemeasur
esbef
orel
endi
ngt
hel
oan.Pr
ior
col
l
ect
ionofr
epor
tsr
egar
dingt
hegoodwi
l
loft
hef
armer
s,educat
ingt
hef
armer
s
r
egar
dingt
heef
fect
sofdef
aul
ti
ngi
ssomeoft
hesuggest
edmeasur
es.
U.N.Lakshman(
2003)t
hest
udyanal
yzedt
her
easonsf
orNPA’
sinI
ndi
an
Bank.Hest
art
edt
her
easoncoul
dbe,di
ver
sionoft
hebankf
und,costov
err
unwhi
l
e
i
mpl
ement
ingt
hepr
oject
,busi
nessf
ail
uresl
i
kepr
oductf
ail
i
ngt
ocapt
uremar
ket
,
i
nef
fi
cient management
,st
rai
ned l
abor r
elat
ions,ol
dtechnol
ogy and pr
oduct
obsol
escence,r
ecessi
on i
n some For
eign count
ri
es and adv
erse exchange r
ate
gov
ernmentpol
i
cies t
owar
d exci
se,i
mpor
ts and expor
ts,wi
l
lfuldef
aul
tfr
auds,
def
ici
enci
esi
nthesy
stem ofcr
edi
tappr
aisalmoni
tor
ingandf
oll
ow up,del
ayi
n
subsi
dies.
Ami
tabh Joshi(
2003)t
he st
udy f
ound t
hatpr
ofi
tabi
l
ity and v
iabi
l
ity of
dev
elopmentf
inanci
ali
nst
it
uti
onsar
edi
rect
lyaf
fect
edbyqual
i
tyandper
for
manceof
adv
ances.Thebasi
cel
ementofsoundmanagementsy
stem i
squi
cki
dent
if
icat
ionof
non-
per
for
mingasset
s,t
hei
rcont
ainmentatmi
nimum l
evel
sandensur
ingt
hatt
hei
r
i
mpi
ngementont
hef
inanci
alsi
satl
ow l
evel
.Excessi
ver
eli
anceoncol
l
ater
all
ed
i
nst
it
uti
onst
olongdr
awnl
i
tigat
ionsandhencei
tshoul
dnotbeal
socr
it
eri
afor
sanct
ion.Bankshoul
dmanaget
hei
rexposur
eli
mitt
ofew bor
rower
sandl
i
nkage
shoul
dbepl
acedwi
thnetownedf
undsf
ordev
elopi
ngcont
rolov
erhi
ghl
ever
agesof
bor
rowerl
evel
.St
udyal
sor
eveal
edt
hatexchangeofcr
edi
tinf
ormat
ionamongbanks
woul
dbeunl
i
mit
edhel
ptot
hem t
oav
oidpossi
bleNPA’
s.Managementi
nfor
mat
ion
sy
stem andmar
keti
ntel
l
igenceshoul
dbeut
il
izedt
othei
rful
lpot
ent
ial
.

19
 Chapt
er3
3.
1Resear
chMet
hodol
ogy
Thepr
esentst
udyi
sanal
yti
calst
udy
.Thepr
imar
yobj
ect
iveoft
hest
udyi
sto
f
indoutt
hef
act
orr
esponsi
blef
orNon-
per
for
mingasseti
nPr
ivat
eSect
orBanksand
Publ
i
cSect
orBanksi
nIndi
a.Thesecondar
ymai
nlycol
l
ect
edf
rom t
hesour
cesof
i
nter
netar
ebankswebsi
tes,andj
our
nal
.Ther
esear
chmet
hodol
ogyusedt
ocar
ry
outt
hisst
udyi
sdescr
ipt
iver
esear
chf
ordescr
ibet
hef
act
orsaf
fect
ingi
nmaki
ng
compar
ebet
weenbankper
for
mancei
nthev
iewofNPAandsomeofsuggest
iont
o
r
educet
heNPA’
sper
cent
ageofconcer
nbanks.Thest
udyi
srel
atedt
oPubl
i
cSect
or
BanksandPr
ivat
eSect
orBankswhi
chi
ncl
udenat
ional
i
zedbank.
Resear
chDesi
gn
Ther
esear
chdesi
gnr
efer
stot
heov
eral
lst
rat
egyt
hatchooset
oint
egr
atet
he
di
ff
erentcomponent
soft
hest
udyi
nacoher
entandl
ogi
calway
,ther
eby
,ensur
ing
ef
fect
iveaddr
esst
her
esear
chpr
obl
em i
tconst
it
utest
hebl
uepr
intf
ort
hecol
l
ect
ion,
measur
ementandanal
ysi
sofdat
a.
Sampl
e
A sampl
edesi
gn a def
ini
tepl
an det
ermi
nebef
oreanydat
a ar
eact
ual
l
y
col
l
ect
edf
orobt
aini
ngasampl
efr
om agi
venpopul
ati
oni
nabanks.Sampl
i
ngi
s
usedt
ocol
l
ect
eddat
afr
om l
i
mit
ednumberofempl
oyees,
wher
easacensusi
sused
f
orl
argenumber
s.Fort
her
esear
ch,
sampl
i
ngmet
hodi
sused.I
tcanbeanal
yzedby
t
hesetofr
espondentsel
ect
edf
rom t
hel
argepopul
ati
onf
ort
hepur
posesur
vey
.
Ther
e ar
e di
ff
erentt
ypes ofsampl
e desi
gn based on t
wo f
act
ornamel
ythe
r
epr
esent
ati
onbasi
sandt
heel
ementsel
ect
iont
echni
que.
Sampl
eAr
ea:
Sampl
i
ngi
sconduct
edi
nbanki
ngi
ndust
ry.

20
3.
2Dat
aCol
lect
ion
Dat
acol
l
ect
ioni
sthepr
ocessofgat
her
ingandmeasur
ingi
nfor
mat
ionon
t
arget
ed cust
omer
.Dat
acol
l
ect
ionenabl
esacust
omer
sand companyanswer
r
elev
antquest
ion.Thedat
agener
atedbasedont
hepr
imar
ydat
aiscal
l
edast
he
secondar
ydat
a.

Ty
pesofDat
a:
Secondar
yDat
a:
Thedat
aiscol
l
ect
edf
orr
epor
tbyv
ari
ousr
ecor
dmai
ntai
nedandst
andi
ng
or
der
soft
hebankswhi
chhel
pasl
otf
orpr
epar
ingt
hisr
epor
t.Secondar
ydat
afor
usmaybet
hepr
imar
ydat
aoft
hepr
evi
ousr
esear
cher
.Ther
ear
emanyway
sfor
col
l
ect
edt
hesecondar
ydat
asomeoft
hem ar
easf
oll
ows.
 Jour
nal
 Magazi
ne
 Books
 Newspaper
 Resear
chPaper

3.
3Ty
peofResear
ch
I
nthi
sresear
chst
udy
,ther
esear
cher
shav
eadopt
edsi
mpl
eexpl
orat
oryt
ypeof
r
esear
cht
oanal
ysi
sthedat
arel
atedNPA'
s.
Quant
it
ati
veResear
ch:
Quant
it
ati
ver
esear
chi
sbasedont
hemeasur
ementofquant
it
yoramount
.It
i
s appl
i
cabl
eto phenomenon t
hatcan be expr
essed i
nter
ms ofquant
it
yand
sy
stemat
ic empi
ri
cal i
nvest
igat
ion,of obser
vabl
e phenomena v
ia st
ati
sti
cal
mat
hemat
ical
orcomput
ati
onal
techni
ques.
The obj
ect
ive of quant
it
ati
ve r
esear
ch i
s t
o dev
elop and empl
oy
mat
hemat
icalmodel
s,t
heor
ies and hy
pot
hesi
s per
tai
ning t
o phenomena.The
pr
ocessofmeasur
ementi
scent
ralt
oquant
it
ati
ver
esear
chbecausei
tpr
ovi
des
expr
essi
on ofquant
it
ati
ver
elat
ionshi
ps.Quant
it
ati
ve dat
ais any dat
athati
n
numer
icalf
rom suchasst
ati
sti
cs,per
cent
age,et
c.Ther
esear
cheri
sanal
ysi
sthe
dat
awi
tht
hehel
pofst
ati
sti
csandhopet
henumberwi
l
lyi
eldonunbi
asedr
esul
tthat

21
canbegener
ali
zedt
osomel
argerpopul
ati
on.

3.
4Dat
aAnal
ysi
sandI
nter
pret
ati
on
Thev
ari
ousf
act
orsar
eresponsi
blef
orr
isei
nNPA’
sinI
ndi
anBanki
ngSect
or.Fi
ve
maj
orr
easonshav
ebeeni
nter
pret
edandment
ionedbel
ow.

AtCr
edi
tEv
aluat
ionSt
age
Sr
.No. Fact
orsAf
fect
ingNPA’
sAtThi
sSt
age

1 Pr
oofofI
ncome/I
TRet
urnsofbor
rowernotv
eri
fi
ed

St
atementofBankAccount
soft
he bor
rowernotst
udi
ed/
ver
if
ied;
2
Conf
ident
ial
Repor
tfr
om ot
herexi
sti
ngBanker
snotobt
ained

3 Ext
ernal
Credi
tSect
ori
ngRepor
tnotscr
uti
nizedpr
oper
ly

Empl
oyment
/busi
nessv
eri
fi
cat
ionnotconduct
edpr
oper
ly;Resi
dence
4 v
eri
fi
cat
ion notconduct
ed as perSi
te Map / or
igi
nalt
it
le di
d
document
s

Mar
ketRepor
tofbor
roweri
ncl
udi
ngi
tssuppl
i
ers/cust
omer
snot
5
t
akenpr
oper
ly

I
nter
pret
ati
on:
The abov
etabl
e depi
ctsf
ive maj
orf
act
ors af
fect
ing NPA’
s atCr
edi
t
Ev
aluat
ionSt
age.Themaj
orf
act
orsemanat
ingf
rom t
her
esear
chi
sthatmostof
ten,
i
npubl
i
csect
orbanks,i
ncomepr
oofi
snotv
eri
fi
edbybankaccountst
atement/I
T
r
etur
nsar
enotv
eri
fi
edf
rom Gov
t.websi
tes.Thi
sresul
tsi
nincor
rectcal
cul
ati
onof
per
missi
blel
oani
ncomeandexcessdi
sbur
sementi
smadet
obor
rowerwhoar
enot
abl
etor
epayhi
ghEMI
sont
ime.

22
AtSanct
ion/Document
ati
onSt
age
Sr
.No. Fact
orsAf
fect
ingNPA’
sAtThi
sSt
age

1 Asset
snotcr
eat
edoutofBankFi
nance

Company St
amp / Si
gnat
ure ofBor
rower
s nott
aken i
simpor
tant
2 document
s/Pr
operAcknowl
edgementofSanct
ioncr
edi
tter
m nott
aken
bybor
rower

3 Sanct
ionTer
ms&Condi
ti
onsnotpr
oper
lydef
inedasperl
oanscheme

Abuseofpowerwi
thSanct
ioni
ngaut
hor
it
y;Dev
iat
ionofBankPol
i
cy
4
r
esul
ti
ngi
nov
er-
fi
nanci
ngduet
oper
sonal
bias

5 Mul
ti
plef
inanci
ngdoneonsomeassetf
raudul
ent
ly

I
nter
pret
ati
on:
Theabov
etabl
edepi
ctsf
act
orsatsanct
ion/di
sbur
sementst
agewhent
he
asset
sar
enotcr
eat
edaspert
ermsandcondi
ti
onsofsanct
ion.Al
so,manyt
imes
r
equi
reddocument
ati
oni
sincompl
ete.Whent
heaccountbet
weenNPAandt
hebank
appr
oachescour
tofl
aw,
duet
olackofpr
operdocument
ati
on,
ther
ecov
eryact
ioni
s
del
ayedort
heaccountr
emai
nsNPA.

23
Pr
ivat
eSect
orBanks
Sect
oralComposi
ti
onofNPA’
sofHDFCBank
Sect
ors 2019(
%)

Busi
nessBanki
ng 6%

Cor
por
ate 16%

Emer
gingCor
por
ate 12%

Ret
ail 58%

Ot
her
s 8%

I
nter
pret
ati
on:
I
nthi
sresear
chi
twasf
oundt
hatt
heHDFC Bankper
cent
ageofNPA i
s
decr
easi
ngf
ort
hey
ear2019.Ther
easonofdecr
easi
ngNPAi
sthatt
hebr
anches
net
wor
kofPr
ivat
eSect
orBanki
sver
yli
mit
edi
nther
uralar
ea.Thenumberofcl
i
ent
s
(
bor
rower
)isv
eryl
esswhencompar
edPubl
i
cSect
orBank.HDFCBankdonotl
end
t
oindust
ri
esl
i
kemanuf
act
uri
ng,
steel
andheav
yindust
ry.

24
Publ
icSect
orBanks
Sect
oralcomposi
ti
onofNPA’
sofPunj
abNat
ionalBank
Sect
ors 2019(
%)

Domest
icAdv
ances 90.
3%

Ov
erseasAdv
ances 9.
7%

Lar
geI
ndust
ry 28.
3%

Agr
icul
tur
e 15.
6%

MSME 18.
3%

Ret
ail
Loan 16.
4%

Ot
her 11.
6%

I
nter
pret
ati
on:
Accor
dingt
othest
udyoft
hesect
oralcomposi
ti
oni
twasf
oundt
hatt
hel
evel
ofNPA’
sishi
gheri
nPunj
abNat
ionalBankcompar
ingwi
tht
heHDFCBank.Themai
n
r
easonsofi
ncr
easi
ngNPAar
ethemi
smanagementofbank.Themaj
orr
easonsar
e
sl
uggi
shnessi
nthedomest
icgr
owt
hdur
ingt
her
ecentpast
,sl
owdowni
nrecov
eryi
n
t
hegl
obaleconomyandcont
inui
nguncer
tai
ntyi
nthegl
obalmar
kett
hisr
easonsf
or
i
ncr
easi
ngNPA.

25
HDFC Bankgr
owt
hinGNPAsduet
o sub-
sect
orspeci
fi
cshocks–
Mar
ch2019
Sect
ors Mar
ch2019(
%)

Mi
ning 31%

FoodPr
ocessi
ng 24%

Pet
rol
eum 36%

Cement 42%

Met
als 46%

Jewel
l
ery 28%

Const
ruct
ion 32%

Tr
anspor
t 27%

Power 38%

Tel
ecom 54%

I
nter
pret
ati
on:
Accor
ding t
o st
udygr
owt
hin GNP i
nMar
ch 2019 i
sfound aspert
hei
r
di
ff
erentsubsect
orspeci
fi
cshock,l
i
kei
nmi
ningsubsect
orgr
owt
hrat
eis31%,i
n
f
oodpr
ocessi
ngsubsect
orgr
owt
hrat
eis24%,i
npet
rol
eum subsect
orgr
owt
hrat
e
i
s36%,whi
l
eincementsubsect
orgr
owt
hrat
eis42%,l
i
ket
hisi
nmet
alsubsect
or
gr
owt
hrat
eis46%,whi
l
einj
ewel
l
erysubsect
orgr
owt
hrat
eis28%,i
nconst
ruct
ion
subsect
orgr
owt
hrat
eis32%,i
ntr
anspor
tsubsect
orgr
owt
hrat
eis27%,whi
l
ein
powergr
owt
hrat
eis38%andt
elecom subsect
orgr
owt
hrat
eis54%.

26
Punj
ab Nat
ionalBankgr
owt
hinGNPAsduet
o sub-
sect
orspeci
fi
c
shocks–Mar
ch2019
Sect
ors Mar
ch2019(
%)

Mi
ning 8%

FoodPr
ocessi
ng 21%

Pet
rol
eum 32%

Cement 11%

Met
als 37%

Jewel
l
ery 30%

Const
ruct
ion 38%

Tr
anspor
t 25%

Power 23%

Tel
ecom 24%

I
nter
pret
ati
on:
Accor
ding t
o st
udygr
owt
hin GNP i
nMar
ch 2019 i
sfound aspert
hei
r
di
ff
erentsubsect
orspeci
fi
cshock,l
i
kei
nmi
ningsubsect
orgr
owt
hrat
eis8%,i
n
f
oodpr
ocessi
ngsubsect
orgr
owt
hrat
eis21%,i
npet
rol
eum subsect
orgr
owt
hrat
e
i
s32%,whi
l
eincementsubsect
orgr
owt
hrat
eis11%,l
i
ket
hisi
nmet
alsubsect
or
gr
owt
hrat
eis37%,whi
l
einj
ewel
l
erysubsect
orgr
owt
hrat
eis30%,i
nconst
ruct
ion
subsect
orgr
owt
hrat
eis38%,i
ntr
anspor
tsubsect
orgr
owt
hrat
eis25%,whi
l
ein
powergr
owt
hrat
eis23%andt
elecom subsect
orgr
owt
hrat
eis24%.

27
Tabl
e:1-NPA(
%)Pr
ivat
eSect
orBankandPubl
icSect
orBankf
ort
heper
iodof
2015t
o2019
Pr
ivat
eSect
orBank Publ
icSect
orBank
Year
HDFC PNB

2019 1.
35 15.
50

2018 1.
28 18.
38

2017 1.
04 12.
53

2016 1.
10 12.
90

2015 0.
89 6.
55

Mean 1.
13 13.
17

SD 0.
18 4.
38

I
nter
pret
ati
on:
Theabov
etabl
eshowsNPA’
sinper
cent
ageoft
otal
GrossAdv
ancesbybanks.
NPA’
sinHDFCbanki
slowert
hanPNBbank.Av
erageNPA’
sfr
om 2015t
o2019of
HDFCbankhav
elesst
han5% whi
l
ethatofal
lthePNBbankhav
emor
ethan5%

28
whi
chshowst
hatasset
squal
i
tyofpr
ivat
esect
orbankar
ebet
tert
hanpubl
i
csect
or
bank.

Tabl
e:2-Sect
or-
wiseav
erageNPA(
%)pr
ivat
esect
orbanksf
ort
heper
iodof2015
t
o2019
Par
ti
cul
ars HDFC

A.Pr
ior
it
ySect
or

Agr
icul
tur
eandal
l
iedact
ivi
ti
es 2.
50

I
ndust
ry 1.
84

Ser
vices 1.
58

Per
sonal
loans 0.
85

Tot
alofA 6.
77

B.NonPr
ior
it
ySect
or

Agr
icul
tur
eal
l
iedact
ivi
ti
es 1.
57

I
ndust
ry 1.
01

Ser
vices 0.
89

Per
sonal
loans 0.
63

Tot
alofB 4.
1

Tot
al(
A+B) 10.
87

I
nter
pret
ati
on:
Theabov
etabl
edescr
ibest
hesect
or-
wiseav
erageNPA’
sofHDFCbankf
or
t
heper
iodof2015t
o2019.I
npr
ior
it
ysect
oragr
icul
tur
eandal
l
iedact
ivi
ti
escat
egor
y
r
egi
ster
edhi
gherNPA’
s.Tot
alav
erageofNPA’
sofpr
ior
it
yandnon-
pri
ori
tysect
orsi
s
l
esst
han5%i
nHDFCbank.

29
Tabl
e:3-Sect
orwi
seav
erageNPA(
%)ofpubl
icsect
orbanksf
ort
heper
iodof2015
t
o2019
Par
ti
cul
ars PNB

A.Pr
ior
it
ySect
or

Agr
icul
tur
eandal
l
iedact
ivi
ti
es 9.
73

I
ndust
ry 16.
15

Ser
vices 7.
81

Per
sonal
loans 5.
61

Tot
alofA 39.
3

B.NonPr
ior
it
ySect
or

Agr
icul
tur
eandal
l
iedact
ivi
ti
es 2.
14

I
ndust
ry 27.
75

Ser
vices 9.
27

Per
sonal
loans 3.
29

Tot
alofB 42.
45

Tot
al(
A+B) 81.
75

I
nter
pret
ati
on:
Theabov
etabl
eshowst
hesect
orwi
seav
erageNPA’
sofPNBbankf
ort
he
per
iodof2015t
o2019.Onanav
eragei
nPNBbankhashi
gherNPAi
nnon-
pri
ori
ty
sect
orascompar
edt
opr
ior
it
ysect
or.I
npr
ior
it
ysect
ori
ndust
rycat
egor
yPNBhas
r
egi
ster
edhi
gherNPA’
s.Tot
alav
erageofNPA’
sofpr
ior
it
yandnon-
pri
ori
tysect
ori
s
mor
ethan81%i
nthePNBBank.

30
Tabl
e:4-Sect
or-
wiseav
erageNPA(
%)ofpr
ivat
esect
orbankandpubl
icsect
or
bankf
ort
heper
iodof2015t
o2019

Ty
peofBank NameofBank Pr
ior
it
ySect
or Non-
pri
ori
tySect
or

Pr
ivat
esect
orbank HDFC 6.
77 4.
1

Publ
i
csect
orbank PNB 39.
3 42.
45

I
nter
pret
ati
on:
Thi
stabl
eshowst
hesect
orwi
seav
erageNPA’
sofHDFCBankandPNBBank
f
orf
ivey
ear
sfr
om 2015t
o2019.Acompar
isonofNPA’
sinpr
ior
it
ysect
orbet
ween
HDFC BankandPNB Bankshowst
hatNPA’
shav
ebeenmor
einPNB Bankas
compar
edt
oHDFC Bank.Thi
sisbecauseadv
ancesbyPNBBankt
othepr
ior
it
y
sect
orwer
ehi
gh,wher
easi
nNon-
pri
ori
tysect
orNPA’
shasbeenl
essi
nHDFCBank,
t
hisi
sbecauseHDFC Bankpr
efer
redt
olendt
henon-
pri
ori
tysect
ort
hant
othe
pr
ior
it
ysect
or.

31
 Chapt
er4
4.
1 Fi
ndi
ngsoft
heSt
udy
 Peopl
eint
heagr
icul
tur
alsect
orwer
ehar
dlyi
nter
est
edi
nret
urni
ngt
hel
oansas
t
heywer
econf
identt
hatt
hel
oanswi
tht
hei
nter
estwoul
dbewr
it
tenof
fbyt
he
successi
vegov
ernment
.
 I
nthi
sresear
chi
twasf
oundt
hatNPAofpubl
i
csect
orbanksi
sont
her
ise
because si
nce ear
ning ar
esl
owi
ng,cust
omer
shav
e del
ayed t
hei
rpay
ment
r
esul
ti
ngi
nNPA.
 Av
erageNPA’
sfort
hest
udyper
iodoft
hesel
ect
edPr
ivat
eSect
orBanki
.e.HDFC
Banki
s10.
87%andPubl
i
cSect
orBanki
.e.Punj
abNat
ionalBankar
emor
ethan
81.
75%whi
chshowssi
tuat
ionqui
teadv
ersei
nthebot
hcases.
 I
ncompar
isont
oHDFCBank,Punj
abNat
ionalBankr
egi
ster
edhi
gherNPAi
n
bot
hpr
ior
it
ysect
orandnonpr
ior
it
ysect
or.
 St
udyr
esul
tshowst
hatHDFC Bankhasr
egi
ster
edi
nbot
hpr
ior
it
yandnon-
pr
ior
it
ysect
orl
owerNPA’
s.
 NPAmanagementofHDFCi
squi
tebet
terduet
obet
tercol
l
ect
ionpr
act
ices.

32
4.
2Concl
usi
on

Based ont
hei
nfor
mat
ion i
tcan beconcl
uded t
hatt
heGov
ernmentand
Reser
veBankI
ndi
ashoul
dmakemor
eref
ormsi
nfi
nanci
alsect
orespeci
all
yin
banki
ngt
ocont
rolandav
oidt
hebadl
oansandadv
ances.St
udyr
eveal
sthatt
ypesof
banksandsect
or-
wiseNPA’
sdonothav
ecombi
neef
fectov
ert
otalNPA’
soft
he
banks.I
ncr
easi
ngNPA notonl
yimpact
sfi
nanci
alposi
ti
onofbanksbutal
sot
he
r
eput
ati
onandgoodwi
l
l.
Ther
esul
tshowst
hatt
heNPAmanagementofpr
ivat
esect
orbanki
smuch
bet
tert
hant
hepubl
i
csect
orbank.Thi
sshowst
hatr
educedNPAofHDFCBanki
s
hel
pingbankt
oincr
easet
hei
rpr
ofi
t.Thoughcompl
etel
yer
adi
cat
ionofNPAi
nbanks
i
snotpossi
blehowev
eri
tcanbecont
rol
l
edbyi
mpl
ement
ati
onofst
ri
ngentr
ulesand
r
egul
ati
onbyt
hegov
ernment
.Thusi
tcanbesai
dthatcor
ruptsy
stem,i
rr
esponsi
ble
admi
nist
rat
ion,r
edt
api
sm,i
mpr
operpr
ocessornotf
oll
owi
ngpr
operpr
ocessesand
weakr
ecov
eryhav
emaki
ngNPA ahugebur
denf
ort
hepubl
i
csect
orbankv
iz.
Punj
abNat
ional
Bankascompar
edt
oHDFCBank.
Bot
hthef
inanci
ali
nst
it
uti
onswor
kint
hesameenv
ironmentandst
il
lhav
ea
dr
ast
icdi
ff
erencei
nthei
rNPAmanagementwhi
chi
swor
ri
some.Asweknow t
hat
NPAar
eunheal
thyf
oranyeconomyandsamef
orour
swhi
chi
sdev
elopi
ngal
so.

33
4.
3Suggest
ionsandRecommendat
ions
 Bankshav
etof
indoutt
heor
igi
nal
reasonf
ordef
aul
tofl
oan.
 Pr
operi
dent
if
icat
ionoft
heguar
ant
orshoul
dbecheckbyt
hebankandhi
s/her
weal
thal
so,
sot
hathe/
shecan’
tmi
sleadt
hebanks.
 Few l
argebor
rower
s,publ
i
caswel
laspr
ivat
esect
orunder
taki
ngsandmedi
um
andl
argei
ndust
ri
esar
eresponsi
blef
oramaj
orchunkofNPA’
s.Banksshoul
dbe
concent
rat
ingmor
eonr
ecov
eryofduesf
rom l
argebor
rower
s.
 I
n al
ltr
aini
ng cent
erst
her
eshoul
d beatl
eastonesessi
on i
neach cour
se
r
egar
dingr
educt
ionofNPA,
whi
chwi
l
lhel
pincr
eat
ingf
avor
abl
eat
mospher
e.
 Bankshoul
dtr
yto est
abl
i
sh t
he br
anchesi
n compet
it
ivemar
ket
,so i
twi
l
l
i
ncr
easet
hei
rpr
ofi
t.
 I
fbor
roweri
sunabl
etodeposi
tloani
nst
all
mentf
orsomet
ime,
heshoul
dnotbe
pr
essur
izedbutt
hebankershoul
drephr
aset
hel
oani
nst
all
ment
s,sot
hati
twi
l
l
beconv
eni
entt
othebor
rower
.
 Assi
sti
ng t
hebor
rower
sindev
elopi
ng hi
sent
repr
eneur
ialski
l
lswi
l
lnotonl
y
est
abl
i
shagoodr
elat
ionbet
weent
hebor
rower
sbutal
sohel
pthebanker
sto
keepat
rackoft
hei
rfunds.

34
 Bi
bli
ogr
aphy
 Books:
 Chaudhar
y,K.&Shar
ma,M.
,“Per
for
manceofI
ndi
anPubl
i
cSect
orBanksand
Pr
ivat
eSect
orBanks”
.
 R.
K.Mi
shr
a,“
Per
for
mingAsset
sinI
ndi
anBanks”
.
 Resear
chmet
hodol
ogy“
Met
hods&Techni
ques”secondedi
ti
onbyC.
RKot
har
i.

 Jour
nal
s:
 I
nter
nal
Jour
nal
ofAdv
ancedResear
ch
 Jour
nal
ofResear
chi
nBanki
ngandFi
nance
 I
CFAIJour
nal
ofBankManagement
 Gy
anj
yot
iE-
jour
nal

 Resear
chPaper
s:
 Chaudhar
y,K,&Shar
ma,M (
2011)
.Per
for
manceofI
ndi
aPubl
i
cSect
orBanks
and Pr
ivat
e Sect
orBanks:A compar
ati
ve st
udy
.Int
ernat
ionalj
our
nalof
i
nnov
ati
on,
managementandt
echnol
ogy
,2(
3),
249.
 Taqi
,Mohd,Must
afa.S.
M(2008)Fi
nanci
alAnal
ysi
sofPubl
i
cSect
orBanksand
Pr
ivat
eSect
orBanksofI
ndi
a:ACompar
ati
veSt
udyofPunj
abNat
ionalBankand
HDFCBank,
Int
ernat
ional
Academi
cJour
nal
ofBusi
nessManagement
,26-
47.
 Pet
ersenM AandRaj
anRG(
1995)
,“TheEf
fectofCr
edi
tMar
ketCompet
it
ionon
Lendi
ngRel
ati
onshi
p”.TheQuar
ter
lyJour
nalofEconomi
cs,Vol
.110,No.2,pp.
407-
443.
 Pat
idar
,S.
,Kat
ari
a,A.(
2012)
,anal
ysi
sofNPA i
nPr
ior
it
ySect
orLendi
ng:A
compar
ati
vest
udybet
weenPubl
i
cSect
orBanksandPr
ivat
eSect
orBanksof
I
ndi
a.Ret
ri
evedf
rom Bauddhi
kVol
ume3,
No.
-1Janeuar
y-Apr
il
-2012.

 WebRef
erence:
 Rao,May
urandPat
el,Anki
ta.Ast
udynon-
per
for
mingasset
swi
thr
efer
encet
o
publ
i
csect
orbanksandpr
ivat
esect
orbanksi
nIndi
a.Jour
nalofManagement
andSci
ence,
Vol
.5,
No.1Mar
.2015,
ISSN:
2249-
1260.
 A compar
ati
veper
for
manceoft
wobanksi
nUni
tedAr
abEmi
rat
es,Resear
ch

35
 Jour
nal
ofFi
nanceandAccount
ing,
5(21)
,24-
29.
 Compar
ati
veAnal
ysi
sofDomest
icFor
eignBankOper
ati
onsi
nBangl
adesh.The
Gl
obal
Jour
nal
andFi
nanceEconomi
cs,
4(1)
,37-
46
 Punj
abNat
ionalBank(
2006-
2015)
,Publ
i
shedAnnualRepor
tsf
rom 2006-
2007t
o
2015-
2016.Websi
teofPunj
abNat
ional
Bank.Samad,
A.(
2007)
.

 Websi
tes:
 wwwhdf
cbank.
com
 www.
hdf
cindi
a.com
 www.
pnbi
ndi
a.i
n
 ht
tps:
//www.
money
cont
rol
.com/

36