INTRODUCTION ABOUT BANKS

The two Banking system of an economy is of predominant importance two for its monetary and
financial development. It types the core of the monetary region and plays a necessary position in
transmitting monetary coverage impulses to the whole economic machine. NPAs have turned to be a
principal stumbling block affecting the profitability of Indian Banks before 1992, Banks did no
longer divulge the horrific debts sustained through them and provision made by using them fearing
that it may additionally have an adverse. The introduction of prudential norms fortify the Banks
monetary function and decorate transparency is regarded as a milestone measure in the financial
sector reform. An Explorative learn about was once adopted to achieve the objectives of the study,
and they learn about used to be carried out in SBI Bank, “Non-Performing Assets”. The objective of
the study is to analyze the NPA stage, how some distance the financial organization has been
successful in decreasing the NPA level. This paper is an attempt to compare the non- performing
assets of SBI and HDFC Bank using the secondary data analysis and to comment on their individual
performances too. This study also identifies the cause of the increasing non-performing assets in the
Banks with few suggestions have also been extended. Introduction A robust banking sector is very
significant for healthy economy. One in every of the foremost vital and major roles contend by
banking sector is that of loaning business. It’s usually inspired as a result of it's the result of funds
being transferred from the system to productive functions that conjointly results into economic
process. As there area unit execs and cons of everything, constant is with loaning business that
carries credit risk, that arises from the failure of receiver to satisfy its written agreement obligations
either throughout the course of a dealing or on a future obligation. The failure of the banking sector
could have Associate in nursing adverse impact on different sectors. Non- playing assets area unit
one in every of the main considerations for banks in India. NPAs mirror the performance of banks. A
high level of NPAs suggests high chance of an oversized variety of credit defaults that have an effect
on the gain and net-worth of banks and conjointly erodes theworth of the quality. The foreign terrorist
organization growth involves the need of provisions that reduces the general profits and shareholders’
worth. the difficulty of Non playing Assets has been mentioned at length for national economy
everywhere the planet. The matter of NPAs isn't solely touching the banks however conjointly the
full economy in truth high level of NPAs in Indian banks is nothing however a mirrored image of the
state of health of the business and trade. This project deals with understanding the construct of
NPAs, its magnitude associated major causes for an account changing into non-performing,
projection of NPAs over next years in banks and closing remarks.

Introduction to Banking Bank

A financial institution that is licensed to deal with money and its substitutes by accommodating time
and demand deposits, constructing loans, and spending in securities. The Bank generates profits from
the modification in the interest rates charged and paid. The development of Banking is an inevitable
precondition for the healthy and rapid development of the national economic structure. Banking
institutions have contributed much to the development of the developed countries of the world.
Today we cannot imagine the business world without banking institutions. Banking is as important
as blood in the human body. Due to the development of Banking advances are increased and

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business activities developing so it is rightly said, "The development of Banking is not only the root
but also the result of the development of the business world."

HISTORY OF INDIAN BANKING:-

The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:-
Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991
prior to Indian banking sector Reforms.
New phase of Indian Banking System with the advent of Indian Financial & Banking Sector
Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase  , Phase  and Phase.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
shareholders. and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank
of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency
Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established
which started as private shareholders banks, mostly Europeans.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank
of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore
were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the
functioning and activities of commercial banks, the Government of India came up with The
Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive
powers for the supervision of banking in India as the Central Banking Authority.During those day’s
public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast
of it the savings bank facility provided by the Postal department was comparatively safer.
Moreover, funds were largely given to traders.

Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially
in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI
and to handle banking transactions of the Union and State Governments all over the country.Seven
banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major
process of nationalization was carried out. It was the effort of the then Prime Minister of India,
Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalized.Second
phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more
banks. This step brought 80% of the banking segment in India under Government ownership.

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The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalization of State Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalization of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.Banking in the
sunshine of Government ownership gave the public implicit faith and immense confidence
about the sustainability of these institutions.

Phase III
This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by
his name which worked for the liberalization of banking practices.The country is flooded with
foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to
customers. Phone banking and net banking is introduced. The entire system became more
convenient and swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from any crisis
triggered by any external macroeconomics shock as other East Asian Countries suffered.
This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital
account is not yet fully convertible, and banks and their customers have limited foreign
exchange exposure.
Nationalization Of Banks In India
The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime
minister. It nationalized 14 banks then. These banks were mostly owned by businessmen and even
managed by them.
 Central bank of India
 Bank of Maharashtra
 Dena bank
 Punjab national bank

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  Syndicate bank
 Canara bank
 Indian bank
 Indian overseas bank
 Bank of Baroda
 Union bank
 Allahabad bank
 United bank of India
 Cooperative bank
 Bank of India

Before the steps of nationalization of Indian banks, only State Bank of India (SBI) was
nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalisation of Seven State
Banks of India (formed subsidiary) took place on 19th July, 1960.

The State Bank of India is India's largest commercial bank and is ranked one of the top five
banks worldwide. It serves 90 million customers through a network of 9,000 branches and it
offers -- either directly or through subsidiaries -- a wide range of banking services.
The second phase of nationalization of Indian banks took place in the year 1980. Seven more
banks were nationalized with deposits over 200 crores. Till this year, approximately 80% of the
banking segment in India was under Government ownership.

After the nationalization of banks in India, the branches of the public sector banks rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.

1955: Nationalisation of State Bank of India.

1959: Nationalisation of SBI subsidiaries.

1969: Nationalisation of 14 major banks.

1980: Nationalisation of seven banks with deposits over 200 crores.

Banking Sector: Growth & Evolution

The Indian Banking sector has undergone a sea of change in the past decade with the
Implementation of the ongoing banking sector reforms. The sector, over the years has
become more efficient with the implementation of prudential norms for asset classification and
improved thrust on technology advancement. The PSBs (Public Sector Banks) still dominate
the sector with 75% of the market share of business and profits. The new private sector banks
with their technology driven business model are fast catching up with the PSBs. The last two years
has seen banks book windfall gains in treasury profits. With the interestrates hardening up, banks
need to focus on core profit growth.

GROWTH & EVOLUTION OF THE FINANCIAL SECTOR

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The financial sector is in a process of rapid transformation. Reforms are continuing as part of the
overall structural reforms aimed at improving the productivity and efficiency of the economy.
The role of an integrated financial infrastructure is to stimulate and sustain economic
growth.The US$ 28 billion Indian financial sector has grown at around 15 per cent and has
displayed stability for the last several years, even when other markets in the Asian region were
facing a crisis. The financial sector has kept pace with the growing needs of corporate and
other borrowers. Banks, capital market participants and insurers have developed a wide range of
products and services to suit varied customer requirements.

BANKING INDUSTRY
The Indian banking system has a large geographic and functional coverage. Presently the total
asset size of the Indian banking sector is 3US$ 270 billion while the total deposits amount to
US$ 220 billion with a branch network exceeding 66,000 branches across the country.
Revenues of the banking sector have grown at 6 per cent CAGR over the past few years to reach
a size of US$ 15 billion. While commercial banks cater to short and medium term financing
requirements; national level and state level financial institutions meet longer- term requirements.
Banking has grown into a technology concentrated and customer friendly model with a focus on
convenience. The sector is moving towards the emergence of financial supermarkets in the form of
universal banks providing a set of services ranging from retail to corporate banking,industrial
lending and investment banking.

BUSINESS ENVIRONMENT AND LIKELY FUTURE DIRECTION

In the banking industry, business, in simple terms is defined as the sum of the deposits and
advances as on a particular date. The business of scheduled commercial banks is estimated to grow
from Rs 21,644 billion in 2012-13 to Rs 32,229 billion by 2015-16 at a CAGR of 14.2 per cent,
led by continued growth in retail finance, gradual recovery in commercial credit, pick-up in
agriculture credit and growth in deposits. Due to the slowdown in industrial growth, many
corporate restructured themselves to survive; hence, credit off take was low. With reduced
avenues for investment of surplus funds, banks turned to retail financing. The retail finance
portfolio grew by around 27 per cent during the same period.

A bank is a financial institution that provides banking and other financial services. By the term
bank is generally understood an institution that holds a Banking Licenses. Banking licenses are
granted by financial supervision authorities and provide rights to conduct the most fundamental
banking services such as accepting deposits and making loans. There are also financial institutions
that provide certain banking services without meeting the legal definition of a bank, a so-called Non-
bank. Banks are a subset of the financial services industry.

The word bank is derived from the Italian banca, which is derived from German and means bench.
The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of
business bank, having its bench physically broken. Moneylenders in Northern Italy originally did
business in open areas, or big open rooms, with each lender working from his own bench or table.

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Typically, a bank generates profits from transaction fees on financial services or the interest spread
on resources it holds in trust for clients while paying them interest on the asset. Development of
banking industry in India followed below stated steps.

Ø Banking in India has its origin as early as the Vedic period. It is believed that the transition
from money lending to banking must have occurred even before Manu, the great Hindu
Jurist, who has devoted a section of his work to deposits and advances and laid down rules
relating to rates of interest.
 Banking in India has an early origin where the indigenous bankers played a very important
role in lending money and financing foreign trade and commerce. During the days of the East
India Company, was the turn of the agency houses to carry on the banking business. The
General Bank of India was first Joint Stock Bank to be established in the year 1786. The
others which followed were the Bank Hindustan and the Bengal Bank.

 In the first half of the 19th century the East India Company established three banks; the Bank
of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three
banks also known as Presidency banks were amalgamated in 1920 and a new bank, the
Imperial Bank of India was established in 1921. With the passing of the State Bank of India
Act in 1955 the undertaking of the Imperial Bank of India was taken by the newly constituted
State Bank of India.

 The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve
Bank of India Act, 1934 which was followed up with the Banking Regulations in 1949. These
acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing,
supervision and control of banks. Considering the proliferation of weak banks, RBI
compulsorily merged many of them with stronger banks in 1969.

 The three decades after nationalization saw a phenomenal expansion in the geographical
coverage and financial spread of the banking system in the country. As certain rigidities and
weaknesses were found to have developed in the system, during the late eighties the
Government of India felt that these had to be addressed to enable the financial system to play
its role in ushering in a more efficient and competitive economy. Accordingly, a high-level
committee was set up on 14 August 1991 to examine all aspects relating to the structure,
organization, functions and procedures of the financial system. Based on the
recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive
reform of the banking system was introduced in 1992-93. The objective of the reform
measures was to ensure that the balance sheets of banks reflected their actual financial health.
One of the important measures related to income recognition, asset classification and
provisioning by banks, on the basis of objective criteria was laid down by the Reserve Bank.

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 1. Comprises balance of expired loans, compensation and other bonds such as National Rural
Development Bonds and Capital Investment Bonds. Annuity certificates are excluded.

2. These represent mainly non- negotiable non- interest bearing securities issued to
International Financial Institutions like International Monetary Fund, International Bank
for Reconstruction and Development and Asian Development Bank.

3. At book value.

4. Comprises accruals under Small Savings Scheme, Provident Funds, Special Deposits of
Non- Government

 In the post-nationalization era, no new private sector banks were allowed to be set up.
However, in 1993, in recognition of the need to introduce greater competition which could
lead to higher productivity and efficiency of the banking system, new private sector banks
were allowed to be set up in the Indian banking system. These new banks had to satisfy
among others, the following minimum requirements:

(i) It should be registered as a public limited company;

(ii) The minimum paid-up capital should be Rs 100 crore;
(iii) The shares should be listed on the stock exchange;
(iv) The headquarters of the bank should be preferably located in a centre which does not
have the headquarters of any other bank; and
(v) The bank will be subject to prudential norms in respect of banking operations,
accounting and other policies as laid down by the RBI. It will have to achieve
capital adequacy of eight per cent from the very beginning.

 A high level Committee, under the Chairmanship of Shri M. Narasimham, was constituted by
the Government of India in December 1997 to review the record of implementation of
financial system reforms recommended by the CFS in 1991 and chart the reforms necessary
in the years ahead to make the banking system stronger and better equipped to compete
effectively in international economic environment. The Committee has submitted its report to
the Government in April 1998. Some of the recommendations of the Committee, on
prudential accounting norms, particularly in the areas of Capital Adequacy Ratio,
Classification of Government guaranteed advances, provisioning requirements on standard
advances and more disclosures in the Balance Sheets of banks have been accepted and
implemented. The other recommendations are under consideration.

Ø The banking industry in India is in a midst of transformation, thanks to the economic

liberalization of the country, which has changed business environment in the country. During
the pre-liberalization period, the industry was merely focusing on deposit mobilization and
branch expansion. But with liberalization, it found many of its advances under the non-
performing assets (NPA) list.

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BANKING SYSTEM IN INDIA

The Banking System in India consists of:

1. Reserve Bank

2. Development Banks

3. Public Sector Bank.

4. Foreign Banks

5. Private Sector Banks

6. Cooperative Banks

7. Regional Rural Banks

The Reserve Bank of India:-

The Reserve Bank of India is the Central Bank of the Country and came into being by the Reserve
Bank of India Act 1934. It was nationalized in 1948.
Reserve Bank of India is the bank that issues and regulates the issue of currency in India .The
banker to the Government of India and the State governments. It manages the public debt. It has the
obligation to transact the banking business of the Central Government. It undertakes to accept money
on behalf of the Government and make payment on its behalf. The banker’s bank. Commercial banks
maintain their current account with the Reserve Bank of India.

Development Banks:-
These were set up to give long term finance for the development of the country. These are the
Industrial Finance Corporation of India and the Industrial Development Bank of India, The Industrial
Reconstruction Bank of India and the National Bank for Agriculture and Rural Development. A
former development bank, the Industrial Credit and Investment Corporation of India Ltd. by a
reverse merger in 2002,became a normal commercial bank.It is expected that the other development
banks, having outlived their utility would also be either converted to commercial banks or merged
with commercial banks.
Public Sector Banks:-
These are banks which the Government either owns or has a majority stake in it.
The largest is the State Bank of India which was formed by the merger of the Presidency Banks – the
Bank of Bengal, the Bank of Bombay and the Bank of Madras in 1921. It was then known as the
Imperial Bank. It was nationalized in 1955 by the passing of the State Bank of India Act, 1955. It
has seven subsidiaries or associates.
Private Sector Banks:-
These are banks which are not government owned or controlled. Their shares are freely traded
in the Stock Markets.
Cooperative Banks:-

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 Cooperative Banks are those that are created by a group of individual to support either a community
or a religious group. They operate in metropolitan, urban and semi urban centers to cater to the needs
of small borrowers.
Regional Rural Banks:-
These came into being on October 2, 1975 when 5 regional rural banks were established under what
became the Regional Rural Banks Act 1975. These were to bridge the gap in rural credit granting
loans and advances to small and marginal farmers, artisans, small entrepreneur and persons of small
means engaged in trade, commerce, industry or other productive ,activities within their area of
operation.
Local Area Banks:-
Local Area Banks came into existence in 1999 and licenses were given for these banks as it was felt
that regular commercial banks were not financial the rural/ agricultural sector adequately. Licenses
were given to open branches in three districts. Branches in urban/ semi urban areas were granted
only after ten branches were established in rural areas/ villages.
Foreign Banks:-
These are branches of banks incorporated outside India. In 1995/ 96 many other foreign
banks (optimistic in view of India’s liberalization) opened branches in India. However, after banking
began to become increasingly competitive and margins began to be squeezed coupled with large non
performing assets, many banks closed their branches.
Sectors Banks
Central Bank:- Reserve Bank of India

Nationalized Banks:- State Bank of India , Allahabad Bank , Andhra Bank , Bank of Baroda ,
Bank of India , Bank of Maharashtra , Canara Bank , Central Bank of
India , Corporation Bank , Dena Bank , Indian Bank , Indian Overseas
Bank , Oriental Bank of Commerce , Punjab & Sind Bank , Punjab
National Bank , Syndicate Bank , IDBI Bank, Union Bank of India ,
United Bank of India , UCO Bank , Vijaya Bank.
,
Private Banks:- Axis Bank , Bank of Rajasthan · Bharat Overseas Bank · Catholic Syrian
Bank · Centurion Bank of Punjab ·City Union Bank .Development Credit
Bank · Dhanalakshmi Bank ·Federal Bank · Ganesh Bank of Kurundwad ·
HDFC Bank ·ICICI Bank · IndusInd Bank ·ING Vysya Bank ·Jammu &
Kashmir Bank ·Karnataka Bank Limited · Karur Vysya Bank ·Kotak Mahindra
Bank · Lakshmi Vilas Bank ·Nainital Bank ·Ratnakar Bank · SBI Commercial
and International Bank · South Indian Bank · Tamilnad Mercantile Bank Ltd. .

Citibank · HSBC · Standard Chartered

Foreign Banks:-
Regional Rural South Malabar Gramin Bank
Banks:-

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 Cooperative Banks:- The Andaman and Nicobar State Co-operative Bank Ltd. The Arunachal
Pradesh State co-operative Apex Bank Ltd. The Assam Co-operative
Apex Bank Ltd The Bihar State Co-operative Bank Ltd. The Chandigarh
State Co-operative Bank Ltd.

Introduction of HDFC bank

BANK: HDFC BANK LTD

ADDRESS: SCF NO.-1, ROSE AVENUE SCHEME OF IMPROVEMENT TRUST,
MALERKOTLA.MALERKOTLA PUNJAB 148023

STATE: PUNJAB (HDFC BANK LTD HAS BRANCHES IN 28 DISTRICT OF PUNJAB

STATE)

DISTRICT : SANGRUR ( HDFC BANK LTD HAS 33 BRANCHES IN SANGRUR DISTRICT

OF PUNJAB STATE)

BRANCH : MALERKOTLA-PUNJAB

HDFC BANK

HDFC Bank Ltd. is an Indian banking and financial services company headquartered

in Mumbai, Maharashtra. It has a base of 104154 permanent employees as of 30 June 2019. HDFC
Bank is India’s largest private sector lender by assets.[9] It is the largest bank in India by market
capitalisation as of March 2020. It was ranked 60th in 2019 BrandZ Top 100 Most Valuable Global
Brands

History
HDFC Bank was incorporated in 1994, with its registered office in Mumbai, Maharashtra, India. Its
first corporate office and a full service branch at Sandoz House, Worli were inaugurated by the
then Union Finance Minister, Manmohan Singh.
As of June 30, 2019, the Bank's distribution network was at 5500 branches across 2,764 cities. The
bank also installed 430,000 POS terminals and issued 23570,000 debit cards and 12 million credit
cards in FY 2017.
Products and service
HDFC Bank provides a number of products and services including wholesale banking, retail
banking, treasury, auto loans, two wheeler loans, personal loans, loans against property,

10
consumer durable loan, lifestyle loan and credit cards. Along with this various digital
products are Payzapp and SmartBUY.
Mergers
HDFC Bank merged with Times Bank in February 2000. This was the first merger of two private
banks in the New Generation private sector banks category.
In 2008, Centurion Bank was acquired by HDFC Bank. HDFC Bank Board approved the acquisition
of CBOP for 95.1 billion INR in one of the largest mergers in the financial sector in India.
Investments
In March 2020, HDFC bank made investment of 1,000 crores in Yes bank. As per the scheme of
reconstruction of Yes Bank, 75% of the total investment by the Corporation would be locked in for 3
years. On March 14, Yes Bank allotted 100 crore shares of face value of 2 each for a consideration of
10 per share (including 8 premium) to the Corporation aggregating to 7.97 per cent of the post issue
equity share capital of Yes bank.
Listings and shareholding
The equity shares of HDFC Bank are listed on the Bombay Stock Exchange and the National Stock
Exchange of India. Its American Depository Shares are listed on NYSE and the global depository
receipt are listed on the Luxembourg Stock Exchange where two GDRs represent one equity share of
HDFC Bank

Shareholders (as of 31 December

Shareholding[15]
2015)

Promoter group (HDFC) 21.57%

Foreign institutional investors (FII) 32.4%

Individual shareholders 8.5%

Bodies corporate 7.5%

Insurance companies 5.38%

Mutual funds/UTI 8.65%

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 NRI/OCB/others 0.29%

Financial institutions/banks 2.75%

ADS/GDRs 18.78%

Corporate social responsibilitye

HDFC Bank's Parivartan initiative has spent 4438 million towards CSR in 2018-19 making it the
third largest CSR spender in India.
Fraud
There are no know instances and it is known to be a very clean and righteous bank. It is known in the
banking world as the leader in terms of ideals. Some known instances of users reporting signature
forgery and replacement of application documents by HDFC employees are there though.
A HDFC bank manager arrested for Rs 59.41 lakh fraud in Odisha
Organizational Goals

HDFC’s main goals are to

a) Develop close relationships with individual households.

b) Maintain its position as the premier housing finance institution in the country,

c) Transform ideas into viable and creative solutions.

d) Provide consistently high returns to shareholders.

e) To grow through diversification by leveraging off the Existing client.

with the bank's risk appetite. The bank is committed to maintain the highest level of ethical
standards, professional integrity, corporate governance and regulatory compliance.

Subsidiary and Associate Companies

The subsidiaries of HDFC consists of

1. HDFC Bank

2. HDFC Mutual Fund

3. HDFC Standard Life Insurance Company

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4. HDFC Realty

5. HDFC Chubb General Insurance Company Limited.

6. Intel net Global Services Limited

7. Credit Information Bureau (India) Limited

8. Other Companies Co – Promoted by HDFC

 HDFC Trustee Company Ltd.

 GRUH Finance Ltd.
 HDFC Developers Ltd.
 HDFC Venture Capital Ltd.
 HDFC Venture Trustee Company Ltd
 HDFC Securities Ltd.
 HDFC Holding Ltd.
 Home Loan Services India Pvt. Ltd.

PERSONAL BANKING

Loan Product Deposit Product Investment & Insurance

 Auto Loan  Saving a/c  Mutual Fund

 Loan Against Security  Current a/c  Bonds
 Loan Against Property  Fixed deposit  Knowledge Centre
 Personal loan  Demat a/c  Insurance
 Credit card  General and Health
 Safe Deposit Lockers
 2-wheeler loan  Insurance Equity and
 Commercial vehicles Derivatives
finance
 Mudra Gold Bar
 Retail business
banking
 Tractor loan
 Working Capital

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 Cards Payment Services Access To Bank
Credit
 Credit card  Net safe  Net Banking
 Debit card  Merchant  One View
 Prepaid card  Prepaid refill  Insta Alert
Forex service  Billpay  Mobile Banking
 Visa bill pay  ATM
 Insta pay  Phone Banking
 Product & Services  Direct pay  Email Statements
 Trade Services  Visa money transfer  Branch Network
 Forex service  E-money
 Branch Locater
 RBI Guidelines

WHOLESALE BANKING

Corporate Small and Medium Financial Institutions and

Enterprises Trusts

Ø Funded Services Ø Funded Services BANKS

Ø Non Funded Ø Non Funded Services
Ø Clearing Sub-Membership
Services Ø Specialized Services
Ø RTGS – submembership
Ø Value Added Ø Value added services
Ø Fund Transfer
Services Ø Internet Banking
Ø ATM Tie-ups
Ø Internet Banking
Ø Corporate Salary a/c
Ø Tax Collection
Financial Institutions

Mutual Funds

Stock Brokers

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 Insurance Companies

Commodities Business

Trusts

Products and Services – HDFC Bank

Product range:

The following is the product range offered at HDFC: While various deposit products offered by the
bank are assigned different names, the deposit products can be categorized broadly into the following
types. Definition of major deposit schemes are as under: -

1. Demand deposits:

"Demand Deposits" means a deposit received by the bank which is withdrawn able on demand;

a) Savings Account:

"Savings Deposits" means a form of Demand Deposit which is subject to restrictions as to the
number of withdrawals as also the amounts of withdrawals permitted by the bank during any
specified period; HDFC provides with saving bank account with the usual facilities, and one also
gets a free ATM card, intrbranch banking, bill payment facilities, phone banking and mobile
banking.

2. Term Deposits:

"Term Deposit" means a deposit received by the bank for a fixed period withdraw able only after the
expiry of the fixed period and includes deposits such as Recurring / Double Benefit Deposits .

3. Notice Deposit:

''Notice Deposit'' means Term Deposit for a specific period but which can be withdrawn on giving at
least one complete banking day's notice.

4. Current Account:

"Current Account" means a form of Demand Deposit wherefrom withdrawals are allowed any
number of times depending upon the balance in the account or up to a particular agreed amount and
will also include other deposit accounts which are neither Savings Deposit nor Term Deposit; The
account holder gets a personalized cheque book, monthly account statements, and Inter-branch
banking.

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5. Corporate Account:-

These are more commonly known as Salary Accounts. These are account in HDFC bank with zero
balance. These are given to salaried people. These accounts are opened by the employer for the
employees to deposit the salary of the employee directly to the account.

6. HDFC Bank Preferred:-

A preferential Savings Account where in, one is assigned with a dedicated Relationship Manager,
who’s you’re the one point contact. One also get privileges like fee waivers, enhanced ATM
withdrawal limit, priority locker allotment, free Demat Account and lower interest rates on loans.

7. Sweep-In Account:-

A Fixed Deposit linked to one’s Savings Account. So, even if one’s Savings Account runs a bit short,
one can issue a cheque (or use ATM Card).

8. Super Saver Account:-

It gives one an overdraft facility up to 75% of one’s fixed deposit. In an emergency, you can access
your funds while your fixed deposit continues to earn high interest.

9. HDFC Bank Plus:-

Apart from Regular and Premium Current Accounts HDFC also has HDFC Bank Plus, a Current
Account and then something extra for the HDFC bank customers. One can transfer up to Rs. 50 lakh
every month at no extra charges, between the four metros.

1. Demat Account:
One can conduct hassle-free transactions on the stock market for one’s shares. The shares held by the
customer are protected from damage, loss and theft, by maintaining these shares in electronic form.
This account can be accessed through Internet too.

2. Loans:
There are a variety of loan schemes offered like personal loans, new car loans, used car loans, loan
against shares, consumer loans, two wheeler loans, and home loans.

HDFC’s main goals are to :-

The primary objective of HDFC is to enhance residential housing stock and to promote home
ownership. To acquire by purchase, lease, exchange, hire or otherwise lands & property or any
interest in the same in India. To advance money to any person/ persons, company or corporation,
society or association either at interest without, and or with or without any security and in particular
to advance money to shareholders of the company or to oth4r persons to enable the person to erect,
or purchase, or enlarge.

INTRODUCTIOB OF SBI BANK

BANK : STATE BANK OF INDIA
16
BRANCH: MALERKOTLA

STATE: PUNJAB

DISTRICT: SANGRUR (STATE BANK INDIA HAS 86 BRANCHES IN SANGRUR

DISTRICT OF PUNJAB STATE)

CITY: MALERKOTLA

STATE BANK OF INDIA:-

The State Bank of India (SBI) is an Indian multinational, public sector banking and financial
services statutory body. It is a government corporation statutory body headquartered in Mumbai,
Maharashtra. SBI is ranked as 236th in the Fortune Global 500 list of the world's biggest
corporations of 2019. It is the largest bank in India with a 23% market share in assets, besides a share
of one-fourth of the total loan and deposits market.
The bank descends from the Bank of Calcutta, founded in 1806, via the Imperial Bank of India,
making it the oldest commercial bank in the Indian subcontinent. The Bank of Madras merged into
the other two "presidency banks" in British India, the Bank of Calcutta and the Bank of Bombay, to
form the Imperial Bank of India, which in turn became the State Bank of India in 1955.
[8]
 The Government of India took control of the Imperial Bank of India in 1955, with Reserve Bank
of India (India's central bank) taking a 60% stake, renaming it the State Bank of India.

HISTORY OF SBI BANK:-

The roots of the State Bank of India lie in the first decade of the 19th century when the Bank of
Calcutta later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was
one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15 April
1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were
incorporated as joint stock companies and were the result of royal charters. These three banks
received the exclusive right to issue paper currency till 1861 when, with the Paper Currency Act, the
right was taken over by the Government of India. The Presidency banks amalgamated on 27 January
1921, and the re-organised banking entity took as its name Imperial Bank of India. The Imperial
Bank of India remained a joint stock company but without Government participation.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which
is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 1 July 1955,
the Imperial Bank of India became the State Bank of India. In 2008, the Government of
India acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of
interest because the RBI is the country's banking regulatory authority.
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This made eight
banks that had belonged to princely states into subsidiaries of SBI. This was at the time of the first
Five Year Plan, which prioritised the development of rural India. The government integrated these
banks into the State Bank of India system to expand its rural outreach. In 1963 SBI merged State
Bank of Jaipur (est. 1943) and State Bank of Bikaner (est.1944).

17
SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911), which SBI
acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of Lahore
(est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank,
which had been established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao
Scindia. The bank had been the Dukan Pichadi, a small moneylender, owned by the Maharaja. The
new bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin
in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of
Travancore, already had an extensive network in Kerala.
There was, even before it actually happened, a proposal to merge all the associate banks into SBI to
create a single very large bank and streamline operations.
The first step towards unification occurred on 13 August 2008 when State Bank of
Saurashtra merged with SBI, reducing the number of associate state banks from seven to six. On 19
June 2009, the SBI board approved the absorption of State Bank of Indore, in which SBI held 98.3%.
(Individuals who held the shares prior to its takeover by the government held the balance of 1.7%.)
The acquisition of State Bank of Indore added 470 branches to SBI's existing network of branches.
Also, following the acquisition, SBI's total assets approached ₹10 trillion. The total assets of SBI and
the State Bank of Indore were ₹9,981,190 million as of March 2009. The process of merging of State
Bank of Indore was completed by April 2010, and the SBIndore branches started functioning as SBI
branches on 26 August 2010.
On 7 October 2013, Arundhati Bhattacharya became the first woman to be appointed Chairperson of
the bank. Mrs. Bhattacharya received an extension of two years of service to merge into SBI the five
remaining associate banks.

Operations
SBI provides a range of banking products through its network of branches in India and overseas,
including products aimed at non-resident Indians (NRIs). SBI has 16 regional hubs and 57 zonal
offices that are located at important cities throughout India.
 Domestic presence
SBI has over 24000 branches in India. In the financial year 2012–13, its revenue was 2.005
trillion (US$28 billion), out of which domestic operations contributed to 95.35% of revenue.
Similarly, domestic operations contributed to 88.37% of total profits for the same financial year.
Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by Government in
August 2014, SBI held 11,300 camps and opened over 3 million accounts by September, which
included 2.1 million accounts in rural areas and 1.57 million accounts in urban areas.
 International presence
As of 2014–15, the bank had 191 overseas offices spread over 36 countries having the largest
presence in foreign markets among Indian banks. SBI operates several foreign subsidiaries or
affiliates.

18
In 1989, SBI established an offshore bank, State Bank of India International (Mauritius) Ltd. This
then amalgamated with The Indian Ocean International Bank (which had been doing retail banking
in Mauritius since 1979) to form SBI (Mauritius) Ltd. Today, SBI (Mauritius) Ltd has 14 branches –
13 retail branches and 1 global business branch at Ebene in Mauritius.  SBI Sri Lanka now has three
branches located in Colombo, Kandy and Jaffna. The Jaffna branch was opened on 9 September
2013. SBI Sri Lanka is the oldest bank in Sri Lanka; it was founded in 1864.
In 1982, the bank established a subsidiary, State Bank of India, which now has ten branches—nine
branches in the state of California and one in Washington, D.C. The 10th branch was opened in
Fremont, California on 28 March 2011. The other eight branches in California are located in Los
Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield.
In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo–Nigerian Merchant
Bank and received permission in 2002 to commence retail banking. It now has five branches in
Nigeria.
In Nepal, SBI owns 55% of "Nepal SBI Bank Limited". (The state-owned Employees Provident
Fund of Nepal owns 15% and the general public owns the remaining 30%.) Nepal SBI Bank Limited
has branches throughout the country.
In Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest.
In Indonesia, it owns 76% of PT Bank Indo Monex.
The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.
In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8
million in October 2005.
In January 2016, SBI opened its first branch in Seoul, South Korea.
 Former Associate Banks
SBI acquired the control of seven banks in 1960. They were the seven regional banks of former
Indian princely states. They were renamed, prefixing them with 'State Bank of'. These seven banks
were State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of
Indore (SBN), State Bank of Mysore (SBM), State Bank of Patiala (SBP), State Bank of
Saurashtra (SBS) and State Bank of Travancore (SBT). All these banks were given the same logo as
the parent bank, SBI. The State Bank of India and all its associate banks used the same
blue Keyhole logo. The State Bank of India wordmark usually had one standard typeface, but also
utilized other typefaces. The word mark now has the keyhole logo followed by "SBI".
The plans for making SBI a single very large bank by merging the associate banks started in 2008,
and in September the same year, SBS merged with SBI. The very next year, State Bank of Indore
(SBN) also merged.
Following a merger process, the merger of the 5 remaining associate banks, (viz. State Bank of
Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State
Bank of Travancore); and the Bharatiya Mahila Bank) with the SBI was given an in-principle
approval by the Union Cabinet on 15 June 2016. This came a month after the SBI board had, on 17

19
May 2016, cleared a proposal to merge its five associate banks and Bharatiya Mahila Bank with
itself.
On 15 February 2017, the Union Cabinet approved the merger of five associate banks with SBI. An
analyst foresaw an initial negative impact as a result of different pension liability provisions and
accounting policies for bad loans.

 Non-banking subsidiaries
Apart from five of its associate banks (merged with SBI since 1 April 2017), SBI's non-banking
subsidiaries include:

 SBI Capital Markets Ltd

 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
 SBI Life Insurance Company Limited
In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the
remaining capital), to form a joint venture life insurance company named SBI Life Insurance
company Ltd.
 Other SBI service points
As of 31 March 2017, the SBI group had 59,291 ATMs. Since November 2017, SBI also offers an
integrated digital banking platform named YONO.
Listings and shareholding
As on 31 March 2017, Government of India held around 61.23% equity shares in SBI. The Life
Insurance Corporation of India, itself state-owned, is the largest non-promoter shareholder in the
company with 8.82% shareholding.

Shareholders Shareholding

Promoters: Government of
54.23%
India

FIIs/GDRs/OCBs/NRIs 18.17%

Banks & Insurance Companies 10.00%

Mutual Funds & UTI 8.29%

20
Others 9.31%

Total 100.0%

The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a constituent of
the BSE SENSEX index, and the National Stock Exchange of India, where it is a constituent of
the CNX Nifty. Its Global Depository Receipts (GDRs) are listed on the London Stock Exchange.
State Bank Of India ready to acquire 49% of the share of Yes Bank. Rs 2,400 crore investment
would be involved in buying 49% stake if it goes alone in stake.
Employee
SBI is one of the largest employers in the country with 209,567 employees as on 31 March 2017, out
of which 23% were female employees and 3,179 (1.5%) were employees with disabilities. On the
same date, SBI had 37,875 Scheduled Castes (18%), 17,069 Scheduled Tribes (8.1%) and 39,709
Other Backward Classes (18.9%) employees. The percentage of Officers, Associates and
Subordinates was 38.6%, 44.3% and 16.9% respectively on the same date. Around 13,000 employees
joined the Bank in FY 2016–17. Each employee contributed a net profit of 511,000 (US$7,200)
during FY 2016–17.

INTRODUCTION ABOUT TOPIC :-

21
The accumulation of huge non-performing assets in banks has assumed great importance. The depth
of the problem of bad debts was first realized only in early 1990s. The magnitude of NPAs in banks
and financial institutions is over Rs.1,50,000 crores.

While gross NPA reflects the quality of the loans made by banks, net NPA shows the actual burden
of banks. Now it is increasingly evident that the major defaulters are the big borrowers coming from
the non-priority sector. The banks and financial institutions have to take the initiative to reduce
NPAs in a time bound strategic approach.

Public sector banks figure prominently in the debate not only because they dominate the banking
industries, but also since they have much larger NPAs compared with the private sector banks. This
raises a concern in the industry and academia because it is generally felt that NPAs reduce the
profitability of a banks, weaken its financial health and erode its solvency.

For the recovery of NPAs a broad framework has evolved for the management of NPAs under which
several options are provided for debt recovery and restructuring. Banks and FIs have the freedom to
design and implement their own policies for recovery and write-off incorporating compromise and
negotiated settlements.

WHAT IS A NPA (NON PERFORMING ASSETS) ?

Action for enforcement of security interest can be initiated only if the secured asset is classified as
Nonperforming asset.

Non performing asset means an asset or account of borrower ,which has been classified by bank or
financial institution as sub –standard , doubtful or loss asset, in accordance with the direction or
guidelines relating to assets classification issued by RBI .

An amount due under any credit facility is treated as “past due” when it is not been paid within 30
days from the due date. Due to the improvement in the payment and settlement system, recovery
climate, up gradation of technology in the banking system etc, it was decided to dispense with “past
due “concept, with effect from March 31, 2001. Accordingly as from that date, a Non performing
asset shell be an advance where

a) Interest and/or installment of principal remain overdue for a period of more than 180 days in
respect of a term loan,

b) The account remains ‘out of order ‘ for a period of more than 180 days ,in respect of an
overdraft/cash credit (OD/CC)

c) The bill remains overdue for a period of more than 180 days in case of bill purchased or
discounted.

d) Interest and/or principal remains overdue for two harvest season but for a period not
exceeding two half years in case of an advance granted for agricultural purpose ,and

22
 e) Any amount to be received remains overdue for a period of more than 180 days in respect of
other accounts

With a view to moving towards international best practices and to ensure greater transparency, it has
been decided to adopt ’90 days overdue ‘norms for identification of NPAs ,from the year ending
March 31,2004,a non performing asset shell be a loan or an advance where;

I. Interest and/or installment of principal remain overdue for a period of more than 90 days in
respect of a term loan,

II. The account remains ‘out of order ‘ for a period of more than 90 days ,in respect of an
overdraft/cash credit (OD/CC)

III. The bill remains overdue for a period of more than 90 days in case of bill purchased or
discounted.

IV. Interest and/or principal remains overdue for two harvest season but for a period not
exceeding two half years in case of an advance granted for agricultural purpose ,and

V. Any amount to be received remains overdue for a period of more than 90 days in respect of
other accounts

Out of order
An account should be treated as out of order if the outstanding balance remains continuously in
excess of sanctioned limit /drawing power. in case where the out standing balance in the principal
operating account is less than the sanctioned amount /drawing power, but there are no credits
continuously for six months as on the date of balance sheet or credit are not enough to cover the
interest debited during the same period ,these account should be treated as ‘out of order’.

Overdue
Any amount due to the bank under any credit facility is ‘overdue’ if it is no paid on the due date
fixed by the bank.

FACTORS FOR RISE IN NPAs

The banking sector has been facing the serious problems of the rising NPAs. But the problem of
NPAs is more in public sector banks when compared to private sector banks and foreign banks. The
NPAs in PSB are growing due to external as well as internal factors.

EXTERNAL FACTORS :-

23
 Ineffective recovery tribunal
The Govt. has set of numbers of recovery tribunals, which works for recovery of loans and
advances. Due to their negligence and ineffectiveness in their work the bank suffers the
consequence of non-recover, their by reducing their profitability and liquidity.

 Willful Defaults
There are borrowers who are able to payback loans but are intentionally withdrawing it.
These groups of people should be identified and proper measures should be taken in order to
get back the money extended to them as advances and loans.

 Natural calamities
This is the measure factor, which is creating alarming rise in NPAs of the PSBs. every now
and then India is hit by major natural calamities thus making the borrowers unable to pay
back there loans. Thus the bank has to make large amount of provisions in order to
compensate those loans, hence end up the fiscal with a reduced profit. Mainly ours farmers
depends on rain fall for cropping. Due to irregularities of rain fall the farmers are not to
achieve the production level thus they are not repaying the loans.

 Industrial sickness
Improper project handling , ineffective management , lack of adequate resources , lack of
advance technology , day to day changing govt. Policies give birth to industrial sickness.
Hence the banks that finance those industries ultimately end up with a low recovery of their
loans reducing their profit and liquidity.

 Lack of demand
Entrepreneurs in India could not foresee their product demand and starts production which
ultimately piles up their product thus making them unable to pay back the money they borrow
to operate these activities. The banks recover the amount by selling of their assets, which
covers a minimum label. Thus the banks record the non recovered part as NPAs and has to
make provision for it.

 Change on Govt. policies

With every new govt. banking sector gets new policies for its operation. Thus it has to cope
with the changing principles and policies for the regulation of the rising of NPAs.The fallout
of handloom sector is continuing as most of the weavers Co-operative societies have become
defunct largely due to withdrawal of state patronage. The rehabilitation plan worked out by
the Central government to revive the handloom sector has not yet been implemented. So the
over dues due to the handloom sectors are becoming NPAs.

24
INTERNAL FACTORS :-

 Defective Lending process

There are three cardinal principles of bank lending that have been followed by the
commercial banks since long.
Ø Principles of safety
Ø Principle of liquidity
Ø Principles of profitability

I. Principles of safety :-

By safety it means that the borrower is in a position to repay the loan both principal and
interest. The repayment of loan depends upon the borrowers:

a. Capacity to pay

b. Willingness to pay

Capacity to pay depends upon:

1. Tangible assets

2. Success in business

Willingness to pay depends on:

1. Character

2. Honest

3. Reputation of borrower

The banker should, there fore take utmost care in ensuring that the enterprise or business for which a
loan is sought is a sound one and the borrower is capable of carrying it out successfully .he should be
a person of integrity and good character.

 Inappropriate technology
Due to inappropriate technology and management information system, market driven
decisions on real time basis can not be taken. Proper MIS and financial accounting system is
not implemented in the banks, which leads to poor credit collection, thus NPA. All the
branches of the bank should be computerized.

 Improper SWOT analysis

25
 The improper strength, weakness, opportunity and threat analysis is another reason for rise in
NPAs. While providing unsecured advances the banks depend more on the honesty, integrity,
and financial soundness and credit worthiness of the borrower.

 Banks should consider the borrowers own capital investment.

 it should collect credit information of the borrowers from_

a. From bankers.
b. Enquiry from market/segment of trade, industry, business.
c. From external credit rating agencies.

 Analyze the balance sheet.

True picture of business will be revealed on analysis of profit/loss a/c and balance
sheet.

 Purpose of the loan

When bankers give loan, he should analyze the purpose of the loan. To ensure safety
and liquidity, banks should grant loan for productive purpose only. Bank should
analyze the profitability, viability, long term acceptability of the project while
financing.

 Poor credit appraisal system

Poor credit appraisal is another factor for the rise in NPAs. Due to poor credit appraisal the
bank gives advances to those who are not able to repay it back. They should use good credit
appraisal to decrease the NPAs.

 Managerial deficiencies
The banker should always select the borrower very carefully and should take tangible assets
as security to safe guard its interests. When accepting securities banks should consider the_

1. Marketability
2. Acceptability
3. Safety
4. Transferability.

The banker should follow the principle of diversification of risk based on the famous maxim
“do not keep all the eggs in one basket”; it means that the banker should not grant advances to a few
big farms only or to concentrate them in few industries or in a few cities. If a new big customer
meets misfortune or certain traders or industries affected adversely, the overall position of the bank
will not be affected.

26
 Like OSCB suffered loss due to the OTM Cuttack, and Orissa hand loom industries. The biggest
defaulters of OSCB are the OTM (117.77lakhs), and the handloom sector Orissa hand loom WCS
ltd (2439.60lakhs).

 Absence of regular industrial visit

The irregularities in spot visit also increases the NPAs. Absence of regularly visit of bank
officials to the customer point decreases the collection of interest and principals on the loan.
The NPAs due to willful defaulters can be collected by regular visits.

 Re loaning process
Non remittance of recoveries to higher financing agencies and re loaning of the same have
already affected the smooth operation of the credit cycle.

Due to re loaning to the defaulters and CCBs and PACs, the NPAs of OSCB is increasing day
by day.

PROBLEMS DUE TO NPA

1. Owners do not receive a market return on there capital .in the worst case, if the banks fails,
owners loose their assets. In modern times this may affect a broad pool of shareholders.

2. Depositors do not receive a market return on saving. In the worst case if the bank fails,
depositors loose their assets or uninsured balance.

3. Banks redistribute losses to other borrowers by charging higher interest rates, lower deposit
rates and higher lending rates repress saving and financial market, which hamper economic
growth.

4. Non performing loans epitomize bad investment. They misallocate credit from good projects,
which do not receive funding, to failed projects. Bad investment ends up in misallocation of
capital, and by extension, labour and natural resources.

Non performing asset may spill over the banking system and contract the money stock, which may
lead to economic contraction. This spill over effect can channelize through liquidity or bank
insolvency:
a) When many borrowers fail to pay interest, banks may experience liquidity shortage. This can
jam payment across the country,

b) Illiquidity constraints bank in paying depositors

c) Undercapitalized banks exceeds the banks capital base.

The three letters Strike terror in banking sector and business circle today. NPA is short form of “Non
Performing Asset”. The dreaded NPA rule says simply this: when interest or other due to a bank
remains unpaid for more than 90 days, the entire bank loan automatically turns a non performing

27
asset. The recovery of loan has always been problem for banks and financial institution. To come out
of these first we need to think is it possible to avoid NPA, no can not be then left is to look after the
factor responsible for it and managing those factors.

 Interest and/or instalment of principal remains overdue for two harvest seasons but for a
period not exceeding two half years in the case of an advance granted for agricultural
purposes, and

 Any amount to be received remains overdue for a period of more than 90 days in respect
of other accounts.

As a facilitating measure for smooth transition to 90 days norm, banks have been advised to move
over to charging of interest at monthly rests, by April 1, 2002. However, the date of classification of
an advance as NPA should not be changed on account of charging of interest at monthly rests. Banks
should, therefore, continue to classify an account as NPA only if the interest charged during any
quarter is not serviced fully within 180 days from the end of the quarter with effect from April 1,
2002 and 90 days from the end of the quarter with effect from March 31, 2004.

Impact of NPA

 Profitability:-
NPA means booking of money in terms of bad asset, which occurred due to wrong choice of
client. Because of the money getting blocked the prodigality of bank decreases not only by
the amount of NPA but NPA lead to opportunity cost also as that much of profit invested in
some return earning project/asset. So NPA doesn’t affect current profit but also future stream
of profit, which may lead to loss of some long-term beneficial opportunity. Another impact of
reduction in profitability is low ROI (return on investment), which adversely affect current
earning of bank.

 Liquidity:-
Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to
borrowing money for shot\rtes period of time which lead to additional cost to the company.
Difficulty in operating the functions of bank is another cause of NPA due to lack of money.
Routine payments and dues.

 Involvement of management:-
Time and efforts of management is another indirect cost which bank has to bear due to NPA.
Time and efforts of management in handling and managing NPA would have diverted to
some fruitful activities, which would have given good returns. Now day’s banks have special
employees to deal and handle NPAs, which is additional cost to the bank.

 Credit loss:-

28
 Bank is facing problem of NPA then it adversely affect the value of bank in terms of market
credit. It will lose it’s goodwill and brand image and credit which have negative impact to the
people who are putting their money in the banks .

REASONS FOR NPA:

Reasons can be divided in to two broad categories:-

A] Internal Factor
B] External Factor

[ A ] Internal Factors:-
Internal Factors are those, which are internal to the bank and are controllable by banks.

 Poor lending decision:

 Non-Compliance to lending norms:

 Lack of post credit supervision:

 Failure to appreciate good payers:

 Excessive overdraft lending:

 Non – Transparent accounting policy:

[ B ] External Factors:-
External factors are those, which are external to banks they are not controllable by banks.

 Socio political pressure:

 Chang in industry environment:

 Endangers macroeconomic disturbances:

 Natural calamities

 Industrial sickness

29
  Diversion of funds and willful defaults

 Time/ cost overrun in project implementation

 Labour problems of borrowed firm

 Business failure

 Inefficient management

 Obsolete technology

 Product obsolete

Types of NPA
A] Gross NPA

B] Net NPA

A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as
on Balance Sheet date. Gross NPA reflects the quality of the loans made by banks. It consists of
all the non standard assets like as sub-standard, doubtful, and loss assets.
It can be calculated with the help of following ratio:

Gross NPAs Ratio  Gross NPAs

Gross Advances

B] Net NPA:
Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs.
Net NPA shows the actual burden of banks. Since in India, bank balance sheets contain a huge
amount of NPAs and the process of recovery and write off of loans is very time consuming, the
provisions the banks have to make against the NPAs according to the central bank guidelines, are
quite significant. That is why the difference between gross and net NPA is quite high.
It can be calculated by following_

Net NPAs  Gross NPAs – Provisions

Gross Advances - Provisions

30
PREVENTIVE MEASUREMENT FOR NPA

 Early Recognition of the Problem:-

Invariably, by the time banks start their efforts to get involved in a revival process, it’s too late to
retrieve the situation- both in terms of rehabilitation of the project and recovery of bank’s dues.
Identification of weakness in the very beginning that is : When the account starts showing first signs
of weakness regardless of the fact that it may not have become NPA, is imperative. Assessment of
the potential of revival may be done on the basis of a techno-economic viability study. Restructuring
should be attempted where, after an objective assessment of the promoter’s intention, banks are
convinced of a turnaround within a scheduled timeframe. In respect of totally unviable units as
decided by the bank, it is better to facilitate winding up/ selling of the unit earlier, so as to recover
whatever is possible through legal means before the security position becomes worse.

 Identifying Borrowers with Genuine Intent:-

Identifying borrowers with genuine intent from those who are non- serious with no commitment or
stake in revival is a challenge confronting bankers. Here the role of frontline officials at the branch
level is paramount as they are the ones who has intelligent inputs with regard to promoters’ sincerity,
and capability to achieve turnaround. Base don this objective assessment, banks should decide as
quickly as possible whether it would be worthwhile to commit additional finance.

In this regard banks may consider having “Special Investigation” of all financial transaction or
business transaction, books of account in order to ascertain real factors that contributed to sickness of
the borrower. Banks may have penal of technical experts with proven expertise and track record of
preparing techno-economic study of the project of the borrowers.
Borrowers having genuine problems due to temporary mismatch in fund flow or sudden
requirement of additional fund may be entertained at branch level, and for this purpose a special limit
to such type of cases should be decided. This will obviate the need to route the additional funding
through the controlling offices in deserving cases, and help avert many accounts slipping into NPA
category.

Timeliness and Adequacy of response:-

Longer the delay in response, grater the injury to the account and the asset. Time is a crucial element
in any restructuring or rehabilitation activity. The response decided on the basis of techno-economic
study and promoter’s commitment, has to be adequate in terms of extend of additional funding and
relaxations etc. under the restructuring exercise. The package of assistance may be flexible and bank
may look at the exit option.

 Focus on Cash Flows:-

While financing, at the time of restructuring the banks may not be guided by the conventional fund
flow analysis only, which could yield a potentially misleading picture. Appraisal for fresh credit
requirements may be done by analyzing funds flow in conjunction with the Cash Flow rather than
only on the basis of Funds Flow.

31
 Management Effectiveness:-
The general perception among borrower is that it is lack of finance that leads to sickness and NPAs.
But this may not be the case all the time. Management effectiveness in tackling adverse business
conditions is a very important aspect that affects a borrowing unit’s fortunes. A bank may commit
additional finance to an aling unit only after basic viability of the enterprise also in the context of
quality of management is examined and confirmed. Where the default is due to deeper malady,
viability study or investigative audit should be done – it will be useful to have consultant appointed
as early as possible to examine this aspect. A proper techno- economic viability study must thus
become the basis on which any future action can be considered.

 Multiple Financing:-

A. During the exercise for assessment of viability and restructuring, a Pragmatic and unified
approach by all the lending banks/ FIs as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise, given the
probability of success/failure.

B. In some default cases, where the unit is still working, the bank should make sure that it
captures the cash flows (there is a tendency on part of the borrowers to switch bankers once
they default, for fear of getting their cash flows forfeited), and ensure that such cash flows are
used for working capital purposes. Toward this end, there should be regular flow of
information among consortium members. A bank, which is not part of the consortium, may
not be allowed to offer credit facilities to such defaulting clients. Current account facilities
may also be denied at non-consortium banks to such clients and violation may attract penal
action.

C. In a forum of lenders, the priority of each lender will be different. While one set of lenders
may be willing to wait for a longer time to recover its dues, another lender may have a much
shorter timeframe in mind. So it is possible that the letter categories of lenders may be
willing to exit, even a t a cost – by a discounted settlement of the exposure. Therefore, any
plan for restructuring/rehabilitation may take this aspect into account.

D. Corporate Debt Restructuring mechanism has been institutionalized in 2001 to provide a

timely and transparent system for restructuring of the corporate debt of Rs. 20 crore and
above with the banks and FIs on a voluntary basis and outside the legal framework. Under
this system, banks may greatly benefit in terms of restructuring of large standard accounts
(potential NPAs) and viable sub-standard accounts with consortium/multiple banking
arrangements.

 Willful Default :-
A] Lok Adalat and Debt Recovery Tribunal

32
 B] Securitization Act

C] Asset Reconstruction

A] Lok Adalat:

Lok Adalat institutions help banks to settle disputes involving account in “doubtful” and “loss”
category, with outstanding balance of Rs. 5 lakh for compromise settlement under Lok Adalat. Debt
recovery tribunals have been empowered to organize Lok Adalat to decide on cases of NPAs of Rs.
10 lakh and above. This mechanism has proved to be quite effective for speedy justice and recovery
of small loans. The progress through this channel is expected to pick up in the coming years.

 Debt Recovery Tribunals(DRT):

The recovery of debts due to banks and financial institution passed in March 2000 has helped in
strengthening the function of DRTs. Provision for placement of more than one recovery officer,
power to attach defendant’s property/assets before judgment, penal provision for disobedience of
tribunal’s order or for breach of any terms of order and appointment of receiver with power of
realization, management, protection and preservation of property are expected to provide necessary
teeth to the DRTs and speed up the recovery of NPAs in the times to come. DRTs which have been
set up by the Government to facilitate speedy recovery by banks/DFIs, have not been able make
much impact on loan recovery due to variety of reasons like inadequate number, lack of
infrastructure, under staffing and frequent adjournment of cases.

 Inability to Pay
Consortium arrangements:
Asset classification of accounts under consortium should be based on the record of recovery of the
individual member banks and other aspects having a bearing on the recoverability of the advances.
Where the remittances by the borrower under consortium lending arrangements are pooled with one
bank and/or where the bank receiving remittances is not parting with the share of other member
banks, the account will be treated as not serviced in the books of the other member banks and
therefore, be treated as NPA.

Corporate debt Restructuring (CDR):

Background
In spite of their best efforts and intentions, sometimes corporate find themselves in financial
difficulty because of factors beyond their control and also due to certain internal reasons. For the
revival of the corporate as well as for the safety of the money lent by the banks and FIs, timely
support through restructuring in genuine cases is called for. However, delay in agreement amongst
different lending institutions often comes in the way of such endeavours.

33
 OBJECTIVES
The objectives of study are-

 To examine and compare the NPA trends of SBI and HDFC for past years.

 To study the impact of non-performing assets (NPA) and the reasons due to which assets
becoming NPAs.

 To analyze which Bank (SBI and HDFC) is better in managing NPA’s.

 To list the causes of the occurrence of NPA in both the Banks.

 To check whether there exist any relationship between Net Profit and Net NPA in case of
both the Banks.

34
 LITERATURE REVIEW

 Bhatia 2007: In his research paper entitled, Non-performing assets of Indian public, private
and foreign sector banks studied that, the NPAs are considered as an important parameter to
judge the performance and financial health of banks. This aims to find the fundamental factors
which impact NPAs of banks.

 Meenakshi Rajeev, H P Mahesh 2010:- In her studied, banking sector reforms and
NPAs in Indian commercial banks to examine the trends of NPAs in India from various
dimensions and to explain how immediate recognition and self-monitoring has been able to
reduce it to a great extent.

 Das, S. (2010): In this paper, the author has discussed NPAs and hast analysed the
parameters which are actually the reasons of NPAs, and have concluded that market failure,
wilful defaults, poor follow-up and supervision, non-cooperation from banks, poor legal
framework, lack of entrepreneurial skills, and diversion of funds are the main reasons of the
never ending growth of these non-performing assets in banks in India.

 Saddu, 2011:- An endeavor is made within the paper that what is NPA? The components
contributing to NPA, the greatness of NPA, reason for tall NPA & their affect on Indian
managing an account operations. Other than capital to chance weight age resources
proportion of open & private segment banks, mgt of credit chance & measures to control the
danger of NPA are too examined.

 Patnaik, B.C.M., Satpathy, I. (2011): This research paper has made an attempt to
find out thegrowing trends and patterns in growth of non-performing assets with special
emphasis on the education loan scheme in Orissa. This paper tries to find the causes behind
the NPAs and tries to suggest the various possible steps to overcome the NPAs.

 Patidar, S. Kataria, A. (2012): The paper analyses the share of NPA as components of
priority sector lending, and the comparative study was done between the Public Sector
Banks and the Private Sector Banks to find the difference of the NPA and to find out the
impact of Priority Sector Lending on the Total NPA of Banks.Statistical tools like regression
and ratio analysis were used to do this research.

 Patnaik, B.C.M., Satpathy,I. (2012): This research study has made a move to
analyse the main reasons behind the increasing NPAs in the capital loans of the co-operative
banks. For the purpose of this study, various borrowers were surveyed to find out the causes
behind these NPAs.

35
 Dr. G. Vadivalagan, 2013:- There appears to be no unanimity within the appropriate
arrangements to be followed in settling the issue. There's also no consistency within the
application of NPA norms. The issue of NPA isn't constrained to as it were Indian public
division banks but it wins within the whole heating industry.

 Srinivas, Dec-2013:-This paper is embraced to consider the reasons for propels getting to
be NPA within the Indian commercial banks & grant reasonable recommendation to overcome
the issue. The crash of the keeping money division may have an unfavorable blow on the other
division. A investor should be exceptionally cautious in lending, since investor isn't loaning
cash out of his possess capital.

 H.S., January 2013:-The research paper recognizes the impact of a set of small scale
financial factors like age, sex, instruction and conjugal status etc. of Indian ranchers on the
administration of their credit. Credit mgt. incorporates arranging, association, controlling,
coordinating & co-coordinating the credit endorsing approaches in arrange to diminish the
non performing resource.

 Ahmad, Z., Jegadeeshwaran, M. (2013): The present study is done on the NPA, and
to find the main causes for NPA. Secondary data was used and analysed for a period of 5
years and analysed by mean, CAGR, ANOVA and ranking banks. The banks were ranked
according to their performance in the effective management of the NPAs.

 Ranjan, R., Dhal, S.C. (2013): This paper used an empirical approach to analyse the
non-performing loan assets of the Indian commercial banks' nonperforming loans by using
regression analysis. This empirical analysis reaches to conclusion as to how the non-
performing loan assets are influenced by three mainbasis of economic factors and financial
factors, which are terms of credit, bank size and macroeconomic shocks.

 Kamra, S. D. (2013): This study was done to analyse the position of NPAs in few
selected public sector banks namely State Bank of India, Punjab National Bank and Central
Bank of India (CBI). It mostly focuses on the measures and the policies pursued by the
banks to effectively manage their NPAs and finally it suggests a robust strategy for the
speedy and effective recovery of the NPAs.

 Arora, N., Ostwal, N. (2014): This study analysed the various classification and
comparison of loan assets of public sector banks and private sector banks. This study
concluded that NPAs are the major problems for the banks, and public sector banks have
higher level of NPAs, when compared to the private sector banks.

36
  Dutta. A (2014): This paper includes the growth of NPA in the public and private sector
banks in India, and analyses sector wise performance of private and public sector banks.

 Joseph, A. L. (2014): This study basically studies the trends of NPAs in the banking
sector, and the internal factors, external factors and the other factors which mainly
contributes to the NPAs rising in the banking sector and also provides suggestions to
overcoming the burden of increasing NPAs.

 D.Jayakkodi., 2015:- A Study on NPA’s of selected Public and Private Sector Banks in
India aimed to look at and compare the Net NPAs and Net NPAs of select Public and Private
Sector Banks.

 Mistry and Savani 2015:- classified Indian private division banks on the premise of
their monetary characteristics and analyzed their money related execution. They found that
return on resources and interest wage have a negative relationship with operational
productivity while, positive relationship with resource utilization and resource estimate.

 Sodhiand Waraich 2016:- made a principal investigation with the assistance of key
budgetary proportions to recognize the esteem of stocks of the chosen banks and their
speculation openings. They found that private and foreign banks are attempting to improve

Das, S. (2010): In this

paper, the author has
discussed NPAs and
hast analysed the
parameters
which are actually
the reasons of
37
NPAs, and have
concluded that
market failure, wilful
defaults, poor follow-up
and supervision, non-
cooperation from
banks, poor legal
framework,
lack of entrepreneurial
skills, and diversion of
funds are the main
reasons of the never
ending

38
growth of these non-
performing assets in
banks in India.
Ahmad, Z.,
Jegadeeshwaran, M.
(2013): The present
study is done on the
NPA, and to find
the main causes for
NPA. Secondary data
was used and analysed
for a period of 5 years
and

39
analysed by mean,
CAGR, ANOVA and
ranking banks. The
banks were ranked
according to
their performance in
the effective
management of the
NPAs.
Ranjan, R., Dhal, S.C.
(2013): This paper used
an empirical approach
to analyse the non-

40
performing loan
assets of the Indian
commercial banks'
nonperforming loans
by using
regression analysis.
This empirical
analysis reaches to
conclusion as to how
the non-
performing loan assets
are influenced by three
main basis of economic
factors and financial
41
factors, which are
terms of credit, bank
size and
macroeconomic shocks.
Reddy, P.K. (2002):
This paper deals
with the experiences
of other Asian
countries in
handling of NPAs. It
further looks into the
effect of the reforms on
the level of NPAs and

42
suggests mechanisms
to handle the problem
by drawing on
experiences from other
countries.
Joseph, A. L. (2014):
This study basically
studies the trends of
NPAs in the banking
sector,
and the internal factors,
external factors and the
other factors which

43
mainly contributes to
the
NPAs rising in the
banking sector and also
provides suggestions to
overcoming the burden
of
increasing NPAs.
Kamra, S. D. (2013):
This study was done to
analyse the position of
NPAs in few selected
public sector banks
namely State Bank of
44
India, Punjab National
Bank and Central Bank
of
India (CBI). It mostly
focuses on the
measures and the
policies pursued by
the banks to
effectively manage
their NPAs and finally it
suggests a robust
strategy for the speedy
and

45
effective recovery of
the NPAs.
Patidar, S. Kataria, A.
(2012): The paper
analyses the share of
NPA as components
of
priority sector lending,
and the comparative
study was done
between the Public
Sector Banks
and the Private Sector
Banks to find the
46
difference of the NPA
and to find out the
impact of
Priority Sector Lending
on the Total NPA of
Banks. Statistical tools
like regression and ratio
analysis were used to
do this research.
12
Das, S. (2010): In this
paper, the author has
discussed NPAs and
hast analysed the
parameters
47
which are actually
the reasons of
NPAs, and have
concluded that
market failure, wilful
defaults, poor follow-up
and supervision, non-
cooperation from
banks, poor legal
framework,
lack of entrepreneurial
skills, and diversion of
funds are the main

48
reasons of the never
ending
growth of these non-
performing assets in
banks in India.
Ahmad, Z.,
Jegadeeshwaran, M.
(2013): The present
study is done on the
NPA, and to find
the main causes for
NPA. Secondary data
was used and analysed

49
for a period of 5 years
and
analysed by mean,
CAGR, ANOVA and
ranking banks. The
banks were ranked
according to
their performance in
the effective
management of the
NPAs.
Ranjan, R., Dhal, S.C.
(2013): This paper used

50
an empirical approach
to analyse the non-
performing loan
assets of the Indian
commercial banks'
nonperforming loans
by using
regression analysis.
This empirical
analysis reaches to
conclusion as to how
the non-
performing loan assets
are influenced by three
51
main basis of economic
factors and financial
factors, which are
terms of credit, bank
size and
macroeconomic shocks.
Reddy, P.K. (2002):
This paper deals
with the experiences
of other Asian
countries in
handling of NPAs. It
further looks into the

52
effect of the reforms on
the level of NPAs and
suggests mechanisms
to handle the problem
by drawing on
experiences from other
countries.
Joseph, A. L. (2014):
This study basically
studies the trends of
NPAs in the banking
sector,
and the internal factors,
external factors and the
53
other factors which
mainly contributes to
the
NPAs rising in the
banking sector and also
provides suggestions to
overcoming the burden
of
increasing NPAs.
Kamra, S. D. (2013):
This study was done to
analyse the position of
NPAs in few selected

54
public sector banks
namely State Bank of
India, Punjab National
Bank and Central Bank
of
India (CBI). It mostly
focuses on the
measures and the
policies pursued by
the banks to
effectively manage
their NPAs and finally it
suggests a robust

55
strategy for the speedy
and
effective recovery of
the NPAs.
Patidar, S. Kataria, A.
(2012): The paper
analyses the share of
NPA as components
of
priority sector lending,
and the comparative
study was done
between the Public
Sector Banks
56
and the Private Sector
Banks to find the
difference of the NPA
and to find out the
impact of
Priority Sector Lending
on the Total NPA of
Banks. Statistical tools
like regression and ratio
analysis were used to
do this research.
12
Das, S. (2010): In this
paper, the author has
discussed NPAs and
57
hast analysed the
parameters
which are actually
the reasons of
NPAs, and have
concluded that
market failure, wilful
defaults, poor follow-up
and supervision, non-
cooperation from
banks, poor legal
framework,
lack of entrepreneurial
skills, and diversion of
58
funds are the main
reasons of the never
ending
growth of these non-
performing assets in
banks in India.
Ahmad, Z.,
Jegadeeshwaran, M.
(2013): The present
study is done on the
NPA, and to find
the main causes for
NPA. Secondary data
was used and analysed
59
for a period of 5 years
and
analysed by mean,
CAGR, ANOVA and
ranking banks. The
banks were ranked
according to
their performance in
the effective
management of the
NPAs.
Ranjan, R., Dhal, S.C.
(2013): This paper used

60
an empirical approach
to analyse the non-
performing loan
assets of the Indian
commercial banks'
nonperforming loans
by using
regression analysis.
This empirical
analysis reaches to
conclusion as to how
the non-
performing loan assets
are influenced by three
61
main basis of economic
factors and financial
factors, which are
terms of credit, bank
size and
macroeconomic shocks.
Reddy, P.K. (2002):
This paper deals
with the experiences
of other Asian
countries in
handling of NPAs. It
further looks into the

62
effect of the reforms on
the level of NPAs and
suggests mechanisms
to handle the problem
by drawing on
experiences from other
countries.
Joseph, A. L. (2014):
This study basically
studies the trends of
NPAs in the banking
sector,
and the internal factors,
external factors and the
63
other factors which
mainly contributes to
the
NPAs rising in the
banking sector and also
provides suggestions to
overcoming the burden
of
increasing NPAs.
Kamra, S. D. (2013):
This study was done to
analyse the position of
NPAs in few selected

64
public sector banks
namely State Bank of
India, Punjab National
Bank and Central Bank
of
India (CBI). It mostly
focuses on the
measures and the
policies pursued by
the banks to
effectively manage
their NPAs and finally it
suggests a robust

65
strategy for the speedy
and
effective recovery of
the NPAs.
Patidar, S. Kataria, A.
(2012): The paper
analyses the share of
NPA as components
of
priority sector lending,
and the comparative
study was done
between the Public
Sector Banks
66
and the Private Sector
Banks to find the
difference of the NPA
and to find out the
impact of
Priority Sector Lending
on the Total NPA of
Banks. Statistical tools
like regression and ratio
analysis were used to
do this research.
12
Das, S. (2010): In this
paper, the author has
discussed NPAs and
67
hast analysed the
parameters
which are actually
the reasons of
NPAs, and have
concluded that
market failure, wilful
defaults, poor follow-up
and supervision, non-
cooperation from
banks, poor legal
framework,
lack of entrepreneurial
skills, and diversion of
68
funds are the main
reasons of the never
ending
growth of these non-
performing assets in
banks in India

RESEARCH METHODOLOGY

The present study is based on secondary data analysis. The data has been collected from various web
sources like annual reports of respective Banks, information bulletins and journals. The data
collected were analyzed with the help of statistical tools like Ratio analysis, and trend analysis.

69
Here, NPA is the independent variable and net profit is the dependent variable. So we see if due to
any changes in the net NPA, the net profits change or not, if yes, whether positively or negatively.

DEFINITION

Research can be define as an organized and systematic study of material & source order to
discover new things and establish facts and research new conclusion.

Type of Research:

The type of research is analytical. Analytical research includes journals magazinies, internet and
fact finding enquiries of different kinds. The major purpose of analytical research is description
of the state of affairs as it exists at present. In social science and business researchwe quite often
use the term Ex post facto research for analytical research studies. The maincharacteristic of this
method is that the researcher has no control over the variables; he canonly report what has
happened or what is happening.

Research Design:

As the research type is descriptive, so we will be using Analytical Research Design to do our
Research work. The methodology of study will be through journals, internet, magazines.
DATA SOURCE:
(a) Primary Data:- The data relating to the project is collected by direct investigation and survey,
for collecting data structured questionnaire is prepaid.

(b) Secondary data: - Secondary data collected by referring to various books, newspapers,
magazines, journals and internet .

RESEARCH DESIGN:--

Present study enquired and brought forward the results concerning the set objectives specified before
which relates to description of the state of affairs as a result it clearly states that it was a
DESCRIPTIVE STUDY, which included fact finding enquiries of different kinds.

SAMPLING DESIGN

Sampling Unit: - The sampling unit is an individual (non-staff member) who is having account in
SBI and HDFC Banks.

Sample Size: - The sample size for the study was 100 individuals, non-staff members of SBI and
HDFC Banks, Malerkotla Out of which 50 belongs to SBI and 50belongs to HDFC bank.

70
Sampling Procedure: - Due to the time and resource constraints the convenience sampling
technique was used. The individuals were selected according to convenience to fill the
questionnaires.

Research Instrument used:- Questionnaires.

POPULATION
Population refer to the part of universe from the sample for conducting the research is selected the
population for my research is the residents of Malerkotla city who are mainly aware of banking
procedure.

SCOPE OF STUDY

The scope of the study is as given below:

 Banks can improve their financial position or can increase their income from credits with the
help of this study.
 This study can be used for comparing the performance of the Bank with other Bank.
 This can also be applicable to know the reasons of increase in NPAs.
 This study also gives light upon impact of NPAs on performance and profit of Banks.

1.Which Type of customers in SBI and HDFC bank.

Table 1-

71
 Responses SBI HDFC

Businessman 10 10

Self employed 5 10

Working professional 15 20

Govt.service employee 20 10

Total 50 50

35
30
25
20
15
10 HDFC
5 SBI

0
l ee
an ed na
sm l oy sio loy
es p es p
sin em r of em
Bu le f e
S gp vic
kin er
or vt.s
W Go

Types of the customer in banks

Interpretation:-
Form the given bar diagram, I had concluded that out of 100 respondents which are 50 SBI bank
and 50 HDFC bank that govt. employees are main customers of SBI bank and businessman are less
minimum. On the other side working professional are main customers of HDFC bank.

2.Bank preference for personal loan.

Table 2 -

72
 Responses No. of respondents Percentages%

SBI 30 30

HDFC 45 45

Others 25 25

Total 100 100

No. of respondents

45
40
35
30 No. of respondents
25
20
15
10
5
0
SBI HDFC Others

Preference for personal loan

Interpretation

Maximum number of customers prefer SBI bank for taking personal loan compare to HDFC bank
bcoz of low interest rate, good image, and public sector bank. 25% customers prefer other bank like
ICICI, PNB, and Bank of Broad.

3. Source of communication (From where customers get the Information

about bank
Table 3-

Responses No. of respondents Percentage %

73
 Advertisement 30 30

Friend 25 25

Family member 35 35

Others 10 10

Total 100 100

No. of respondents
35
30
25
No. of respondents
20
15
10

5
0
Advertisement Friend Family member Others

Sours of communication

Interpretation:

As per as my the study the family members are the main sources of Communication about bank and
advertisement is other sources. Family members influence the decision related to taking personal
loan

4. Do you known the non performing assets of the bank :-

Table 4-

Opinions No. of Respondents Percentage (%)

Yes 10 10

No 90 90

74
 Total 100 100

No. of Respondents

Yes
No

Opinion

Interpretation:

From the above table i can conclude that, out of the respondents’ Only 10% of the respondents said
that they know about NON PERFORMING ASSETS while 90% don’t know about NON
PERFORMING ASSETS

5. Factors consider by customers while taking loan.

Table 5-

Responses No. of Respondents Percentage (%)

Interest rate 70 70

Scheme 20 20

Duration 8 8

75
 Others 2 2

Total 100 100

No. of Respondents

Interest rate
Scheme
Duration
Others

Factor consider by customers

Interpretation:

When any customers planning for taking personal loan from any bank they mainly consider the
interest rate of the particular bank and they give second preference to duration & schemes

6. Loan duration preferred by customers.

Table 6-

Option No. of Respondents Percentage %

12
2 years 12

28
3 years 28

76
 4 years 24 24

More than 5 years 36 36

100
Total 100

No. of Respondents
40
35
30
25 No. of Respondents
20
15
10
5
0
2 years 3 years 4 years More than 5 years

Loan duration preferred by customers

Interpretation:

FOR the given bar diagram, I had concluded that Maximum customers prefer the more than 5 years
duration for personal loan because of long duration monthly installment can be affordable by the
customers.

7. Consideration on policies of bank regarding personal loan by customers.

Table 7-

Opinions No. of Respondents Percentage (%)

Yes 72 72

No 28 28

Total 100 100

77
 No. of Respondents

Yes
No

Policies of bank regarding personal loan by customers

Interpretation:

As per the my study when any customers planning for taking personal loan they consider the
policies of bank regarding personal Customers want to about the all formalities and close related
with loan process.

8. Rating of HDFC bank.

Table 8-

Option No. of Respondents Percentage %

25
Good 25

15
Very good 15

Average 10 10

Below average 0 0

78
 50
Total 50

No. of Respondents
25

20

15 No. of Respondents

10

0
Good Very good Average Below average

Rating of HDFC bank

Interpretation:

As par the given bar diagram According to my study 40% customers are agree that HDFC bank is
very good & good because of good services, more numbers of scheme.

9. Rating the SBI bank.

Table 9-

Option No. of Respondents Percentage %

25
Good 25

15
Very good 15

Average 10 10

Below average 0 0

50
Total 50

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 No. of Respondents
25

20

15 No. of Respondents

10

0
Good Very good Average Below average

Rating the SBI bank

Interpretation:

40% of customers agree that SBI bank is very good & good. because of good image, public sector
bank, low interest rate. Compression to HDFC bank more customers agree that SBI bank is very
good.

10.Firstly, the total advances, net profits, gross NPA and net NPAs have been
compared for both the Banks.
Table 11-

YEAR Total advances Net profit Gross NPA Net NPA

SBI HDFC SBI HDFC SBI HDFC SBI HDFC
2014- 1300026 365495.92 13102 10215.92 56725.34 3438.38 27590.58 896.28
2015
2015- 1463700 464593.96 9951 12296.21 98172.80 4392.83 55807.02 1320.37
2016
2016- 1571078 554568.20 10484 14549.64 112342.99 5885.66 58277.38 1843.99
2017
2017- 1934880 658333.09 -6547 17486.73 223427.46 8606.97 110854.70 2601.02
2018

80
Total advances
2500000

2000000

1500000
Total advances SBI
Total advances HDFC
1000000

500000

0
2014-2015 2015-2016 2016-2017 2017-2018

Net profit

81
 20000

15000

10000

Net profit SBI

5000
Net profit HDFC

0
2014-2015 2015-2016 2016-2017 2017-2018

-5000

-10000

Gross NPA

250000

200000

150000
Gross NPA SBI
Gross NPA HDFC
100000

50000

0
2014-2015 2015-2016 2016-2017 2017-2018

Net NPA

82
 120000

100000

80000

60000 Net NPA SBI

Net NPA HDFC
40000

20000

0
2014-2015 2015-2016 2016-2017 2017-2018

11.Secondly, the examination of the NPA trends for both the Banks for the last
4 years has been done.

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 Year Percentages of gross NPA
SBI% HDFC%
2014-15 4.25 1.30
2015-16 6.5 1.05
2016-17 9.11 0.94
2017-18 10.91 0.90

Capital Adequacy Ratio:

Capital Adequacy Ratio can be defined as ratio of the capital of the Bank, to its assets, which are
weighted/adjusted according to risk attached to them i.e.

Name of the bank Capital adequacy ratio

State bank of India 13
HDFC BANK 15

Capital adequacy ratio

15

14.5

14 Capital adequacy ratio

13.5

13

12.5

12
State bank of India HDFC BANK

Interpretation:
Each Bank needs to create the capital Reserve to compensate the Non-Performing Assets. Here,
HDFC Bank has shown Better capital adequacy ratio with 15% as compare to SBI with 13%.So, we
can say that HDFC Bank has much power than SBI to compensate for NPAs.

Provision Ratio:
Provisions are to be made for to keep safety against the NPA, & it directly affect on the gross profit
of the bank

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 Name of the bank Provision ratio
State bank of India 65.95
HDFC BANK 78.7

Provision ratio

80

75
Provision ratio
70

65

60

55
State bank of India HDFC BANK

Interpretation:
This Ratio indicates the degree of safety measures adopted by the Banks. It has direct bearing
on the profitability, The highest provision ratio is showed by HDFC Bank with 78.7 % as
compared to State Bank of India with 65.95 %.

FINDINGS
The following findings were drawn from the above data analysis-

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 SBI Bank shows high NPAs Ratio as compare to HDFC Bank.

 High NPAs Ratio shows low credit portfolio of SBI Bank.

 In analysis HDFC low risk profile as compare to SBI in terms of NPAs.

 Study also indicates that major NPA increases because of govt. recommended priority
sectors.

 HDFC have better capital adequacy ratio than SBI.

 The total advances have shown an upwards trend for both SBI and HDFC Bank

 Net profits for SBI have been fluctuating over the years whereas in case of HDFC Bank. it
has largely been consistent to around 10,000 crore.

 In the case of % Gross NPA, performance of Private sector Bank- HDFC is doing better as
compared to Public sector Bank –SBI Bank

 In case of % net NPA also, performance of HDFC is observed to be improving over the
years and hence creation of less non- performing assets as compared to SBI Bank Percentage
net NPA for SBI Bank is observed to be continuously rising.

SUGGESTIONS

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 The Banker should take utmost care by ensuring that the enterprise or business for which a
loan is sought is a sound one and the borrower is capable of carrying it out successfully, he
should be a person of high integrity, credibility and good character.

 The Banks, instead of providing loans to small farmers, should make provisions to grant them
insurance policies for crop protection and income security.

 Banker should examine the balance sheet which shows the true picture of business will be
revealed on analysis of profit/loss a/c and balance sheet. While extending loans, Banks
should examine the purpose of the loan.

 The problem should be identified very early so that companies can try their best to stop an
asset or A/C becoming NPA and Bank should try their best to recover NPAs.

 Banks should evaluate the SWOT analysis of the borrowing companies i.e. how they would
face the environmental threats and opportunities with the use of their strength and weakness,
and what will be their possible future growth in concerned to financial and operational
performance.

 Each Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility.

CONCLUSION

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The present study concludes that non- performing assets is a biggest challenge faced by both HDFC
Bank and State Bank of India as it leads to downfall in liquidity balance of the Banks and creates bad
debts on them. Profitability is being affected due to the fluctuations in NPA levels over the years. On
comparing the two Banks based on the effect on its profitability, SBI has higher NPAs as compared
to HDFC Bank. Because of its public nature. Since SBI is a public sector Bank, it is more vulnerable
to give up on the returns of the loans extended to the general public. One other reason for high NPAs
can be a sharp rise in the provisioning of the bad loans. Besides rising NPA, SBI has not managed its
profits consistent, which depicts that the overall management of the resources of the Bank is not
better. On the other hand, the net NPAs for HDFC bank are continuously decreasing since 2014 so,as
compared to SBI they are in a much better condition. The HDFC Bank has also shown good
performance in the last few years. On the other hand SBI Bank is facing the problem of non-
performing assets. The NPAs means those assets which are categorized as bad assets which are not
probably be reverted back to the Banks by the mortgagors. If the precise management of the Non
performing assets is not acknowledged it would hinder the trade of the Banks. The Non-performing
assets would abolish the recent profit, interest revenue due to large provisions of the Non-performing
assets, and would upset the smooth working of the reutilizing of the funds.
To conclude this study we can say about this report, that
 SBI Bank shows very much high NPA ratios as compare to HDFC.
 NPAs represent high level of risk & low level of credit appraisal.
 There are some certain guidelines made by RBI for NPAs which are adopted by Banks.

BIBLIOGRAPHY
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1. www.google.co.in
2. www.moneycontrol.com
3. www.financialexpress.com
4. www.sbi.co.in
5. www.hdfcbank.com
6. www.rbi.org.in
7. http://www.equitymaster.com/stockquotes/mystocks.asp
8. www.investorsworld.com
9. http://en:wikipedia.org
10. www.bankerstraininginstitute.com
11. www.worldbank.co.in
12. www.indiainfoline.com

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