International Journal of Management (IJM)

Volume 11, Issue 2, February 2020, pp.336-344, Article ID: IJM_11_02_037

Available online at https://iaeme.com/Home/issue/IJM?Volume=11&Issue=2
ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: https://doi.org/10.34218/IJM.11.2.2020.037

© IAEME Publication Scopus Indexed

A STUDY OF VARIOUS TYPES OF LOANS OF

SELECTED PUBLIC AND PRIVATE SECTOR
BANKS WITH REFERENCE TO NPA IN STATE
HARYANA
Dr. Bhisham Kapoor
Ex-Officiating Principal & Associate Professor Faculty of Commerce and Business
Administration, M.M.H College, Ghaziabad, Uttar Pradesh, India

Mr. Ramesh Kumar

Research scholar of commerce Department of CCS University, Meerut, Uttar Pradesh, India

ABSTRACT
Banking regulations act of India, 1949 defines banking as “acceptance of deposits
for the purpose of lending or investment from the public, repayment on demand or
otherwise and withdrawable through cheques, drafts order or otherwise”, the major
participants of the Indian financial system are commercial banks, the financial
institution encompassing term lending institutions. Investments institutions, specialized
financial institution and the state level development banks, non banking financial
companies (NBFC) and other market intermediaries such has the stock brokers and
money lenders are among the oldest of the certain variants of NBFC and the oldest
market participants. The asset quality of banks is one of the most important indicators
of their financial health. The Indian banking sector has been facing severe problems of
increasing Non- Performing Assets (NPAs). The NPAs growth directly and indirectly
affects the quality of assets and profitability of banks. It also shows the efficiency of
banks credit risk management and the recovery effectiveness. NPA do not generate any
income, whereas, the bank is required to make provisions for such as assets that why is
a double edge weapon. This paper outlines the concept of quality of bank loans of
different types like Housing, Agriculture and MSME loans in state Haryana of selected
public and private sector banks. This study is highlighting problems associated with the
role of commercial bank in financing Small and Medium Scale Enterprises (SME). The
overall objective of the research was to assess the effect of the financing provisions
existing for the setting up and operations of MSMEs in the country and to generate
recommendations for more robust financing mechanisms for successful operation of the
MSMEs, in turn understanding the impact of MSME loans on financial institutions due
to NPA. There are many research conducted on the topic of Non- Performing Assets
(NPA) Management, concerning particular bank, comparative study of public and
private banks etc. In this paper the researcher is considering the aggregate data of

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 Bhisham Kapoor and Ramesh Kumar

selected public sector and private sector banks and attempts to compare the NPA of
Housing, Agriculture and MSME loans in state Haryana of public and private sector
banks. The tools used in the study are average and Anova test and variance. The findings
reveal that NPA is common problem for both public and private sector banks and is
associated with all types of loans either that is housing loans, agriculture loans and
loans to SMES. NPAs of both public and private sector banks show the increasing trend.
In 2010-11 GNPA of public and private sector were at same level it was 2% but after
2010-11 it increased in many fold and at present there is GNPA in some more than 15%.
It shows the dark area of Indian banking sector.
Key words: Adolescents, Health, Meditation, Psychological, Yoga, Well-Being.
Cite this Article: Bhisham Kapoor and Ramesh Kumar, A Study of Various Types of
Loans of Selected Public and Private Sector Banks with Reference to NPA in State
Haryana, International Journal of Management (IJM), 11(2), 2020, pp. 336-344.
https://iaeme.com/Home/issue/IJM?Volume=11&Issue=2

1. INTRODUCTION
A Non-performing asset (NPA) is defined as a loan in respect of which the interest or
installment of principal has remained „past due‟ for a specified period of time. NPA is used by
financial institutions that refer to loans that are in threat of default. Once the borrower has failed
to make interest or principle payments for 90 days the loan is considered to be a non-performing
asset. Any asset which stops giving returns to its investors for a specified period of time is
known as Non-Performing Asset (NPA).
Indian Banking industry is seriously affected by Non-Performing Assets. More than Rs. 7
lakh crore worth loans are classified as Non-Performing Loans in India. The increased NPA
level is likely to have adverse impact on the bank business as well as profitability thereby the
shareholders do not receive a market return on their capital and sometimes it may erode their
value of investments. As per extant guidelines, banks whose Net NPA level is 5% & above are
required to take prior permission from RBI to declare dividend and also stipulate cap on
dividend payout. Public confidence: Credibility of banking system is also affected greatly due
to higher level NPAs because it shakes the confidence of general public in the soundness of the
banking system. The increased NPAs may pose liquidity issues which is likely to lead run on
bank by depositors. Today, the Indian banking industry is dealing with the mammoth amount
of NPAs which is fifth largest in the world. As on June 30, 2018, the gross NPAs of the banking
sector were 11.52% of the total assets while the net NPAs were 5.92%. As on March 31, 2018,
the gross NPAs were at 11.68% and net NPAs were 6.21%. Thus there is slight improvement
in NPAs this year. In 2020 GNPA of Bank of Baroda is 9.61%, PNA bank 14.21% and in 2017-
18 it was around 18.38%. the current situation in India is that NPAs are in all types of banks
and in all segment of loans either that loan is home loan, car loan or commercial loans.

1.1 Housing Loans

Housing Finance in India during the last decade has gone through many changes. From very
low exposure to the housing sector initially, banks have gone very fast in extending credit to
this sector which has witnessed unprecedented expansion. With urbanization and higher level
of economic growth, it is quiet natural that the housing sector has received a enormous growth.
However, in the recent years the banks have gone faster than what could be a reasonably
justified in financing this sector.

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 A Study of Various Types of Loans of Selected Public and Private Sector Banks with Reference to
NPA in State Haryana

1.2 Agriculture Loans

Finance is regarded to be one of the riskiest industries since it requires a large amount of money
at every level, and good planning is necessary to generate that money as well. Financing
agriculture requires long-term planning, and the Indian banking industry strongly encourages
agricultural financing, which allows farmers to perform tasks efficiently without any
hindrances. Agricultural finance was examined at both the micro and macro level.

1.3 Loans to SMES

A major bottleneck to the growth of the vital Indian small and medium enterprises (SME) sector
is lack of adequate access to finance. Small and Medium enterprises play a crucial role for the
growth of Indian economy by contributing approximately 45% of the industrial output, 40% of
exports, creating 42 million in employment, generating one million jobs every and
manufactures more than 8000 quality products for the Indian and international markets.
According to Chandrakant Salunkhe, President of the SME Chamber of India, out of the total
exports in India, 43% is regards to exports from SME sector. It is anticipated that the figure will
go up by at least 47-48% by 2018.

2. LITERATURE REVIEW
Srinivas K T (2013) emphasis on identify the Non-performing assets at Commercial banks in
India. This paper highlights the various general reasons which convert advances/ assets into
NPA and also give suitable suggestion on findings to overcome the mentioned problem.
Sikdar and Makkad (2013) this paper provide insight on the role of NPA in risk frame work
of selected Indian commercial banks and try to put forward the means of interpreting credit risk
from existing levels of bank NPAs.Further, research highlights the significant steps taken and
procedures implemented by major Indian commercial banks, within the public and private
sector, towards recovery of loans and advances falls into the NPA bracket.
The research for the present paper is based on extensive study of annual publications on
performance of public sector and private sector commercial banks by the Indian Banks
Association (IBA). Further, annual reports of commercial banks in focus for the year ending
March 2012 have been studied. The study conclude that problem of NPAs can be tackled only
with proper credit assessment and risk management mechanism.
Olekar and Talawar (2012) studied NPA management with reference to Karnatak central
co-operative bank ltd., where they described conceptual data about NPA and on the other hand,
they calculated few NPA related ratios and used trend projection method to predict next year
advances for the bank. Their finding includes the considerable reduction of NPA for the bank
and some suggestions for recovery of NPA.
Malyadri and Sirisha (2011) this study examine the NPA of Public Sector banks and Private
sector banks of weaker sections for the period seven years in India. The secondary data
compiled from Report on Trends and Progress of Banking in India, 2004-10 which has been
analyzed by statistical tool such as percentages and compound Annual Growth rate. This study
reveals that the public sector banks have achieved a greater penetration compared to the private
sector banks.
Kaur and Saddy (2011) in the research paper entitled “A Comparative Study of Non-
Performing Assets of Public and Private Sector Banks” an attempt is made to clarify the concept
of NPA, 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 threat
of NPAs are also discussed.

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 Bhisham Kapoor and Ramesh Kumar

Hosmani and Hudagi (2011) conducted study on “Unearthing the Epidemic of Non
Performing Assets with Reference to Public Sector Banks in India” an empirical and descriptive
in nature which shows the magnitude and trend of Public Sector banks in India and found that
there is a slight improvement in the asset quality reflected by decline in the diverse NPA
percentage.
The study concluded that NPA is an important parameter for assessing financial
performance of banks in terms of profitability, liquidity and economies of scale in operation
and banks has to take timely action against degradation of good performing assets.

3. OBJECTIVES
• To study the Housing, Agriculture and MSME loans in the state Haryana provided by
public and private sector banks in state Haryana.
• To compare the NPAs of selected public and private sector banks in Housing,
Agriculture and MSME loans in the selected region.
• To find the most profitable segment of loan for public and private sector banks in state
Haryana.

4. HYPOTHESIS
𝐻02 : There is no significant difference in NPA of different loan instruments.
𝐻03 : There is no significant difference in NPA’s of different instruments in Pvt. Sector banks.

5. RESEARCH METHODOLOGY
5.1 Statement of The Problem
NPA is a critical factor which has adversely impacted the financial sector not only India but all
over the world. NPAs has become an integral part of all types of loans either that is Home loan,
Agriculture loan or loans to SMES. NPAs affect the flow of credit which in turn affect the
development and growth of the economy hence proper flow of credit is the need of the hour.
Hence, the research will be performed with the aim of analyzing the impact of NPA on the
profitability of the banks. The research is also conducted to analyze the impact of important
financial heads on NPA.

5.2 Scope of The Study

The research includes the combination of NPAs of banks (private and public) which are
operating in Haryana. As observed from the literature review, very little researches are there,
which shows a comparative study of NPAs with related to different types of loans of public and
private sector banks in a particular state. Current research covers the NPAs selected public and
private sector banks and providing loan, Agriculture loan or loans to SMES.

5.3 Source of Data

The present study is based on secondary data of NPAs of selected banks. Selected banks include
SBI, PNB and Bank of Baroda and Union Bank in public sector. Other selected banks of private
sector are ICICI bank, HDFC bank, AXIS bank Yes Bank etc. The secondary data of NPA of
selected banks collected from reports of particular bank and annual reports of Reserve Bank of
India and data published by Haryana state.

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 A Study of Various Types of Loans of Selected Public and Private Sector Banks with Reference to
NPA in State Haryana

5.4 Statistical Tool

The current research is analytical in nature and for the analysis of secondary data the researchers
have used the ratios, average and Anova-test for testing of hypothesis.

5.5 Area of Study

Present study is based on the public and private sector commercial banks operating in India and
it includes the home loans, Agricultural loans to farmers and medium and short term loans
provided by banks to SMES in Haryana.

Table 1 Haryana State Public Sector Banks NPAas at 31 March 2020

Bank Housing NPA Agriculture NPA MSME NPA
Bank of Baroda .03 .03 .01
Bank of India .41 37.1 5.27
Bank of Mahahrashtra .03 10.02 1.54
Canara Bank .03 11.83 8.26
Central Bank 0 12.5 .03
Indian Bank .96 20.1 1.38
Punjab National Bank .93 14.9 1.43
State Bank of India .29 14.9 .87
Union Bank of India 1.43 8.06 3.25
UCO Bank .53 23.53 1.85
NPA of all public banks .31 11.9 2.05

NPA public sector banks

Housing NPA Agriculture NPA MSME NPA

Figure 1
SUMMARY
Groups Average Variance
Housing NPA 0.464 0.246027
Agriculture NPA 15.297 99.96473
MSME NPA 2.389 6.665677

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 Bhisham Kapoor and Ramesh Kumar

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 1301.133 4 325.283315 8.454293 0.000186 2.75871
Within Groups 961.8879 25 38.4755176

Total 2263.021 29
Null Hypothesis: There is no significant difference in NPA of different loan instruments
Null hypothesis is rejected
When it comes to NPA of public sector banks it can be observed that BOB has the highest
agriculture NAP followed by UCO bank and Indian Bank. However, Agriculture NPA’s remain
the highest throughout for public sector banks followed by MSME and Housing. When it comes
to check the statistically significant difference amongst the NPA’s with respect to the different
segments it is found that the difference is statistically significant and it can be concluded that
the agriculture, MSME NPA’s are greater that housing Loan NAP’s. This could be due to the
reason that a lot of times government provided a waiver on the agriculture loans to support the
farmers.

Table 2 Haryana State Private Sector Banks NPA as at 31 March 2020

Bank Housing NPA Agriculture NPA MSME NPA
AXIS Bank .01 6.86 .33
HDFC Bank 0 7.13 .31
ICICI Bank .07 3.41 .67
IDBI Bank .19 7.31 4.31
YES Bank 0 4.01 .53
INDUSIND Bank 0 1.66 .32
J & K Bank .14 29.8 6.87
Karnataka Bank .01 .41 2.9
FEDERAL Bank .01 2.62 .82
Total by all private sector banks .02 5.64 .55
Bank .01 6.86 .33

Housing NPA Agriculture NPA MSME NPA

Figure 2

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 A Study of Various Types of Loans of Selected Public and Private Sector Banks with Reference to
NPA in State Haryana

Groups Average Variance

Housing NPA 0.047778 0.005044
Agriculture NPA 7.023333 79.1155
MSME NPA 1.895556 5.444303

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 235.1003 2 117.5501 4.170178 0.0279 3.402826
Within Groups 676.5188 24 28.18828

Total 911.6191 26
Null Hypothesis: There is no significant difference in NPA’s of different instruments in Pvt.
Sector banks
Null hypothesis is rejected
It can be observed that for private sector banks agriculture NAP is highest followed by
MSME loans and housing loans likewise the public sector banks. While for Karnatka bank the
NPA’s of MSME is highest. With respect to the given variation it can be observed that the
difference amongst the NPA’s with respect to different segments is statistically different as the
p-value is less than the level of significance.

Table 3 Comparison between public and private sector banks

Descriptives
N Mean Std. Deviation Std. Error
Housing Public 11 .4500 .47284 .14257
Private 9 .0478 .07102 .02367
Total 20 .2690 .40243 .08999
Agriculture Public 11 14.9882 9.54030 2.87651
Private 9 7.0233 8.89469 2.96490
Total 20 11.4040 9.88651 2.21069
MSME Public 11 2.3582 2.45144 .73914
Private 9 1.8956 2.33330 .77777
Total 20 2.1500 2.34756 .52493

ANOVA
Sum of Squares df Mean Square F Sig.
Housing Between Groups .801 1 .801 6.333 .022
Within Groups 2.276 18 .126
Total 3.077 19
Agriculture Between Groups 314.022 1 314.022 3.663 .072
Within Groups 1543.097 18 85.728
Total 1857.119 19
MSME Between Groups 1.059 1 1.059 .184 .673
Within Groups 103.650 18 5.758
Total 104.709 19

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 Bhisham Kapoor and Ramesh Kumar

Null Hypothesis: There is no significant difference in NPA’s of different instruments between

public and Pvt. Sector banks
Null hypothesis is rejected for Housing not rejected for Agriculture and MSME
When it comes to the comparison of NPA’s with respect to different loan instruments it is
found that the difference between housing loans is significantly different, however in case of
agriculture and MSME the difference is not statistically significant between public and private
sector banks. The public sector banks have a higher NAP is comparison to private sector banks
in housing loans.

6. FINDINGS
• It had been observed that NPA problem is major problem of all commercial banks in
India either that is public or private sector bank, Even problem of NPA is also concerned
with developed countries also and a common platform should be developed to develop
a model for the proper management of NPAs.
• When it comes to the comparison of NPA’s with respect to different loan instruments it
is found that the difference between housing loans is significantly different, however in
case of agriculture and MSME the difference is not statistically significant between
public and private sector banks. The public sector banks have a higher NAP is
comparison to private sector banks in housing loans.
• When it comes to NPA of public sector banks it can be observed that BOB has the
highest agriculture NAP followed by UCO bank and Indian Bank. However, Agriculture
NPA’s remain the highest throughout for public sector banks followed by MSME and
Housing. When it comes to check the statistically significant difference amongst the
NPA’s with respect to the different segments it is found that the difference is statistically
significant and it can be concluded that the agriculture, MSME NPA’s are greater that
housing Loan NAP’s. This could be due to the reason that a lot of times government
provided a waiver on the agriculture loans to support the farmers.
• It can be observed that for private sector banks agriculture NAP is highest followed by
MSME loans and housing loans likewise the public sector banks. While for Karnatka
bank the NPA’s of MSME is highest. With respect to the given variation it can be
observed that the difference amongst the NPA’s with respect to different segments is
statistically different as the p-value is less than the level of significance.
• In SMES loans NPAs are more as compared to housing loans. Housing loans sector is
emerging as on of most profitable segment of loans for Indian commercial banks. NPAs
are lesser is housing loans and more profitable and diversified housing loans schemes
should be developed by commercial banks in India.

7. CONCLUSION
Banking is the base of all economic activities in every country. There will be no development
without the existence of banking sector. Banks provide different types of loans to individual
and corporate. The loans which become bad are known as NPA. NPA problem is major problem
of all commercial banks in India either that is public or private sector bank. NPAs in Agriculutre
sector loans are highest for all commercial banks either public or private. In SMES loans NPAs
are more as compared to housing loans. Housing loans sector is emerging as on of most
profitable segment of loans for Indian commercial banks. NPAs are lesser is housing loans and
more profitable and diversified housing loans schemes should be developed by commercial
banks in India.

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 A Study of Various Types of Loans of Selected Public and Private Sector Banks with Reference to
NPA in State Haryana

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