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NON-PERFORMING ASSETS MANAGEMENT: A COMPARATIVE STUDY OF SBI

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 36 | Journal of Foundational Research, ISSN: 2395-5635 Volume XXXI, No. 2 (D) : July – December : 2023

NON-PERFORMING ASSETS MANAGEMENT: A COMPARATIVE STUDY OF SBI &

HDFC BANK

Dr.C.Esakkiammal, Assistant Professor, Department of B Com (CA), PSGR Krishnammal College

for Women, Coimbatore
Ms. Nidharshanaa V R, Ms. J. Sai Swetha, Student, Department of B Com (CA), PSGR
Krishnammal College for Women, Coimbatore

Abstract: In the current scenario in June, 2020 if we think about the two largest of banks of India
one from the private segment and other from the public sector segment, there is no doubt about it
being HDFC Bank from the Private sector and SBI from the Public sector looking at their balance
sheet, reach and customer base. In the private banking space HDFC Bank is one of bank large bank
having more than
5,000 branches across the country and most commercially successful bank with net profit 21078
crores being the highest across the banking industry with lowest Gross NPAs below 2% for the FY
2018-19. At the same time if we look at the SBI which is most prominent public sector bank in the
public sector space and oldest bank of India with more than 200 years background doing better as
compare to its peer public
sector banks but not as good as it’s private sector peers in different parameters like profitability,
NPAs management, annual growth and key parameter management. However bank has managed
to post the net profit of 862.23 crores in the fiscal 2018-19.
Keywords: HDFC Bank, SBI, Gross NPAs, Net Profit, PCR, CAR

INTRODUCTION
Banking sector has undergone a profound change after the first phase of liberalization in
1991. Indian banking system as we see today, has come a long way. It has transitioned from
unorganized system of lending and borrowings, passing through the establishment of private banks to
nationalized, to liberalization and is now facing the globalization of the financial world. In the post
liberalization era, the banks were mainly focused portfolio growth, widening the network of
branches, lending to priority sectors. They had neglected asset quality and did not focus on asset
quality management.
A loan or advance for which the principle or interest payment was past due for 90 days or
more is referred to as a Non-Performing Asset. Non-performing assets have a direct impact on the
banks' ability to be profitable, liquid, and survive as a whole. The high per cent of non-performing
assets is a result of the rising number of interest or installment payback defaults due to inadequate
debt collection regulations. Due to liberal rules for recovery of debt, non-performing assets are found
to be more in public sector banks as compared to private sector banks.
OBJECTIVE OF THE STUDY
The study is undertaken with the following objectives
● To study the trend of Non-Performing Assets in SBI and HDFC bank
● To compare and analyze Gross Non-Performing Asset and Net Non-Performing Asset in SBI
and HDFC bank
● To analyze the relationship between Net profit and Net Non-Performing Assets.
STATEMENT OF THE PROBLEM
The main source of income for a bank is from interest on loans. The Indian banking sector ,
had been facing the problem of non-performing assets from the early 1990’s. However, it went
through a catastrophe when the deadly COVID 19 hit the economy. Profitability of banks , being
dependent on the recovery of interest on loans , is also affected by the level of non-performing assets.
The level of non-performing assets witnessed a surge in the recent years. This paper analyses the
trend and level of non-performing assets , which can be better understood by doing a comparative
analysis of public sector banks and private sector banks. So , here I have chosen one public sector
bank i.e The State Bank of India(SBI) and one private sector bank Housing Development Finance
Corporation (HDFC) for the purpose of this study. SBI and HDFC bank are the leading public sector
bank and private sector bank respectively, and the most prominent and best in their category.
 37 | Journal of Foundational Research, ISSN: 2395-5635 Volume XXXI, No. 2 (D) : July – December : 2023

METHODOLOGY OF THE STUDY

The study “NPA: A comparative study of State Bank of India and HDFC bank” is based on
secondary sources of data for a period of five years from 2017-18 to 2021-22.The data has been
collected from the annual reports of SBI and HDFC bank , RBI reports , journals , articles and web
pages.
Statistical tools used
The tools used for the purpose of this study are
● Trend analysis
● Ratio analysis
● Correlation analysis

REVIEW OF LITERATURE
Hingu and Solanki (2022) in the thesis study “ A comparative study on Non-Performing Assets in
public sector and private sector banks in India” studied the relationship between Non-Performing
Assets on net profit if the selected banks and comparatively analyzed Non-Performing Assets in
public and private sector bank, correlation analysis was used. The study was based on secondary data
for a period of five years from 2016 to 2021 and sampling used is convenience sampling. The study
observed that Gross Non-Performing Assets per cent was higher in public sector banks as compared
to private sector banks. The study revealed a negative correlation between net profit and Net Non-
Performing Assets in public sector banks and a positive correlation between net oft and Net Non-
Performing Assets in private sector bank. The study concluded that Non-Performing Assets was
more in public sector banks and had negatively impacted profitability.
Sruthi(2021) in the thesis study “ Non-performing assets in Indian banking sector : An analytical
and comparative study between public and private sector banks” studied the impact of Non-
Performing Assets on ICICI and SBI and the relationship between Gross Non Performing Asset, Net
Non- Performing Assets and net profits of the banks. The study was based on secondary data sources
such as the annual report of both banks during 2016 to 2019. The study revealed that Gross Non
Performing Assets of SBI and ICICI increased on an increasing scale, while there was an increase in
Net Non- Performing Assets of SBI and decrease in Net Non-Performing Assets of ICICI. The study
observed that the net profit of SBI was decreasing. The study concluded stating that ICICI had higher
obligation as compared to SBI.
Gupta and Modi (2021) in the thesis study “ A comparative study of effect of Non-Performing
Assets on banks profitability : public sector banks v/s private sector bank” studied the pattern of
Non- Performing Assets in public sector banks and private sector bank and evaluated the correlation
of Non- Performing Asset and profitability. The study was based on secondary data for a period of
ten years from 2010-11 to 2019-20 and correlation analysis was used. The study observed that all six
of the public sector banks selected were found to have an inverse correlation of their Net Non-
Performing Asset with net profit, on the other hand, only two out of the six private sector banks were
found to have significant inverse correlation between Non-Performing Assets and net profits. The
study revealed that Non-Performing Assets always had an inverse relationship with interest of banks.
The study concluded that public sector banks failed to match up with the efficient management of
Non- Performing Assets by private sector banks.
Kumar and Garg (2019) in the thesis study “Non-Performing Asset: A comparative study of Punjab
National Bank and HDFC bank” studied the Gross Non Performing Assets and Net Non-Performing
Assets of PNB and HDFC. The study was based on secondary data collected for a period of five
years from 2014-15 to 2018-19. The study revealed that there was a significant difference in Gross
Non- Performing Assets and Net Non-Performing Assets among PNB and HDFC. The study also
revealed that the level of Gross Non Performing Assets and Net Non-Performing Assets of PNB was
much higher than that of HDFC bank. The study concluded that increased Gross Non Performing
Assets and Net Non-Performing Assets every year indicated the deficiencies in credit appraisal
process followed by the banks.
Agarwala and Agarwala(2019) in the thesis study “A critical review of Non-Performing Assets in
Indian banking industry” studied the growth rate and growth pattern of Gross Non-Performing
Assets.
 38 | Journal of Foundational Research, ISSN: 2395-5635 Volume XXXI, No. 2 (D) : July – December : 2023

The study was based on the secondary data collected for a period of seven years from 2010 to 2017.
The study observed that there was a significant rise in Gross Non-Performing Assets during the
period under study. The study concluded stating that the problem of Non-Performing Assets was
evident not only in small sized banks, but was also evident with big names in the banking spaces.
Gadhia Et Al (2018) in the thesis study “A comparative and analytical study on Non-Performing
Assets of Bank Of Baroda and Axis bank” studied the relationship between net profit and Net Non-
Performing Assets, and analyzed the Non-Performing Assets of Bank Of Baroda and Axis bank. The
study was based on secondary data for a period of five years from 2013 to 2017 from annual reports
of selected banks and , correlation analysis was applied. The study observed that Gross Non
Performing Assets and Net Non-Performing Assets of both the banks increased every year on an
increasing trend , while the net profit showed fluctuations over the years. The study concluded that
Non Performing Assets of Bank of Baroda had a negative correlation while that of Axis bank was
positive.

RESEARCH GAP
Non-Performing Assets of banking industry has been subject to numerous studies and
analysis. Various analysts and academicians have taken efforts to assess the Non-Performing Asset
positions of various private sector banks and public sector banks. However , no study comparing SBI
and HDFC bank by taking the duration from financial year 2018-19 to 2021-22. So, a comparative
analysis by taking SBI and HDFC bank and analyzed their key relationship between key parameters
of banks with NPA. The research improvises the existing knowledge and understanding about key
parameters of Non-Performing Assets.

ANALYSIS AND INTERPRETATION

Analysis of data is the process of systematically applying statistical and/or logical techniques
to describe and illustrate, condense and recap, and evaluate data. Data analysis is important in
business to understand problems facing an organization, and to explore data in meaningful ways.
TREND ANALYSIS
Comparison of Gross NPA trend in SBI and HDFC Bank
Table No:1 Comparison of Gross NPA trend in SBI and HDFC
YEAR SBI(trend in percentage) HDFC (trend in percentage)
2017-18 100 100
2018-19 77.32 130.41
2019-20 66.71 146.97
2020-21 56.57 175.28
2021-22 50.14 187.53
Source: Computed data
INTERPRETATION
The above table compares the GNPA trend in SBI and HDFC. The GNPA of SBI displayed a
decreasing trend, and that of HDFC bank showed increasing trend. An increasing trend means that
the amount of GNPA has increased as compared to base year, and an increase in GNPA has negative
impact on the banks. Decreasing trend means GNPA has decreased and has a positive impact on the
banks.
It can be concluded that the position of Gross NPA in SBI is improving whereas; the
position of Gross NPA in HDFC bank is declining.
Chart No: 1 Comparison of Gross NPA trend in SBI and HDFC
 39 | Journal of Foundational Research, ISSN: 2395-5635 Volume XXXI, No. 2 (D) : July – December : 2023

200
180
160
GROSS NON
140
PERFORMING
Gross NPA

120 ASSETS STATE

100 BANK OF INDIA
80 GROSS NON
60 PERFORMING
ASSETS HDFC
40
BANK
20
0
2017-18 2018-19 2019-20 2020-21 2021-22
TREND OF NET NON PERFORMING ASSETS
Comparison of Net NPA trend in SBI and HDFC Bank
Table No: 2 Comparison of Net NPA trend in SBI and HDFC
YEAR SBI(Trend in percentage) HDFC (Trend in percentage)
2017-18 100 100
2018-19 59.44 123.59
2019-20 46.779 136.19
2020-21 33.2 175.12
2021-22 25.23 169.46
Source: Computed data
INTERPRETATION
The above table shows the comparison of Net NPA trend in SBI and HDFC Bank .The base
year for the above trend analysis is the year 2017-18.The Net NPA position of HDFC Bank has
become a concern during the recent years because an increase in Net NPA essentially has a negative
impact on the bank. The Net NPA position of SBI is improving as it displays a decreasing trend
during the recent years .
The amount of Net NPA was higher in SBI as compared to HDFC bank, even though the
trend of Net NPA of SBI was decreasing in nature.
Chart No: 2 Comparison of Net NPA trend in SBI and HDFC
200
180
160
NET NON
140
PERFORMING
120
Net NPA

ASSETS STATE
100 BANK OF INDIA
80 NET NON
60 PERFORMING
ASSETS HDFC
40
BANK
20
0
2017-18 2018-19 2019-20 2020-21 2021-22
 40 | Journal of Foundational Research, ISSN: 2395-5635 Volume XXXI, No. 2 (D) : July – December : 2023

CAPITAL ADEQUACY RATIO

Comparison of Capital Adequacy Ratio in SBI and HDFC Bank
Table No:3 Comparison of CAR in SBI and HDFC
YEAR SBI (ratio in per cent) HDFC (ratio in percentage)
2017-18 12.6 14.8
2018-19 12.72 17.1
2019-20 13.06 18.5
2020-21 13.74 18.8
2021-22 13.83 18.9
Source: Computed data
INTERPRETATION
The above table shows the Capital Adequacy Ratio (CAR) of the State Bank of
India and HDFC Bank for a period of five years from 2017-18 to 2021-22. The minimum capital
adequacy ratio that is to be maintained by public banks is 12 per cent and that of private banks is 9
per cent. The capital adequacy ratio of SBI increased gradually.
The capital adequacy ratio of both SBI and HDFC increased throughout the
period of study. The increasing trend of capital adequacy ratio indicates that the bank is in a
better position to deal with unexpected losses due to availability of adequate capital.
Chart No: 3 Comparison of CAR in SBI and HDFC
20
18
CAPITAL
Capital Adequacy Ratio

16
ADEQUACY RATIO
14
STATE BANK OF
12 INDIA (ratio in
10 percentage)
8 CAPITAL
6 ADEQUACY RATIO
4 HDFC BANK (ratio in
percentage)
2
0
2017-18 2018-19 2019-20 2020-21 2021-22
PROVISION COVERAGE RATIO
Comparison of Provision Coverage Ratio in SBI and HDFC Bank
Table No: 4-Comparison of PCR in SBI and HDFC
YEAR SBI (ratio in per cent) HDFC (ratio in percentage)
2017-18 66.17 69.8
2018-19 78.13 71.4
2019-20 83.62 72
2020-21 87.75 69.81
2021-22 90.2 72.69
Source: Computed data
INTERPRETATION
The above table shows the comparison of the Provision Coverage Ratio (CAR) of The State
Bank of India and HDFC Bank for a period of five years from 2017-18 to 2021-22The provision
coverage ratio of SBI indicated an increasing trend , while that of HDFC indicated a fluctuating
trend.
 41 | Journal of Foundational Research, ISSN: 2395-5635 Volume XXXI, No. 2 (D) : July – December : 2023

Comparison of the provision coverage ratio of both the banks , it was found that SBI
had better per centages. It indicated that , when compared with HDFC Bank , The State Bank
of India was less vulnerable to non-performing assets and had better quality of assets.
Chart No: 4 Comparison of PCR in SBI and HDFC
100
90
Provision Coversge Ratio

80 PROVISION
COVERAGE RATIO
70
STATE BANK OF
60 INDIA (ratio in
50 percentage)
40 PROVISION
30 COVERAGE RATIO
20 HDFC BANK (ratio in
percentage)
10
0
2017-182018-192019-202020-212021-22
The correlation coefficient between the net profit and Net Non-Performing Assets of HDFC
bank is 0.938836. A positive correlation coefficient indicates that both the variables increase at the
same time. In the above analysis, it was very evident that both net profit and the Net Non-Performing
assets increased during the period of study.

SUGGESTIONS
On conclusion of the study on “A comparative analysis on Non-Performing Assets of State Bank
of India and HDFC Bank”, the following are the suggestions given to improve the level of Non-
Performing Assets in both the banks
● Bank management needs to stress to be effective
● Problems should be identified to prevent or stop the conversion of non-performing assets into
non-performing assets.
● A regular review process is required.
● Bank management can train staff in the techniques of lending to various categories and
continuously encourage staff to improve their knowledge and skills in collecting loans and
advances.
● Bank management may have professional credit rating agencies that assess the suitability of
potential borrowers before providing credit to that in need.
● Banks need to ensure that the factors that influence the level of non-performing assets are
taken into account.
● An effective mechanism with sufficient resources should be put in place to take action to
recover the loan on time.

CONCLUSION
NPA is one of the biggest problems that the Indian Banking industry is facing today. If
proper management of NPAs is not undertaken , it would hamper the business of the banks. If the
concept of NPAs is taken very lightly it would be dangerous for the Indian banking sector.
It is concluded from the above study “A Comparative study on Non-Performing Assets of
State Bank of India and HDFC Bank” that the banks have taken efforts to bring down the level of
non- performing assets year-by-year. However, despite the efforts taken by the banks , the level of
non- performing assets remains as a point of concern. Due to the fact that NPA negatively impact
profits of the banks, the banks must take various preventive steps like strengthening credit appraisal,
conducting post-disbursement reviews and independent audits of funds utilization as well as various
corrective steps like recovery through various recovery channels.
 42 | Journal of Foundational Research, ISSN: 2395-5635 Volume XXXI, No. 2 (D) : July – December : 2023

REFERENCE
1. Hingu HD, Solanki A (2022) A Comparative study on Non-Performing Assets in public sector
banks and private sector banks in India. International Journal of commerce and management
research. Volume 8, Issue 11. Pg no. 9-12. ISSN: 2455-1627. www.managejournal.com.
2. Agarwala V ,Agarwala N (2019) A critical review of Non-Performing Assets in Indian banking
industry. Rajagiri management journal. Volume 13 No.2 Pg no. 12-23
3. Gadhia N M ,Mahila S D R B , Kundaliya M J (2018) A comparative and analytical study on Non-
Performing Assets of Bank Of BARODAA and Axis Bank . IMPACT International journal of
research in humanities , arts and literature. Volume 6 ,Issue 5 Pg no. 295-302. ISSN: 2321-8878.
www.impactjournals.us

Websites
1. https://sbi.co.in/web/investor-relations/annual-report
2. https://www.hdfcbank.com/personal/about-us/investor-relations/annual-reports
3. https://www.wikipedia.org
4. https://www.investopedia.com/terms/n/non-performing-assets.asp

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