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Management of non performing advances a study with reference to public sector banks

01 Dec 2002-
About: The article was published on 2002-12-01 and is currently open access. It has received 4 citations till now. The article focuses on the topics: Public sector.
Citations
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Journal ArticleDOI
TL;DR: In this paper, the authors have empirically established the relationship between financial sector developments and economic growth and highlighted the importance of a healthy and stable banking system in deciding the pace of development of an economy as it boosts mobilization of funds and acts as a catalyst in the country's growth process.
Abstract: Within the broad realm of financial system, the banking system is one of the pivotal integrants as banks form the major part of financial institutions in India as well as worldwide (Gerschenkron, 1962; Jadhav & Ajit, 1996). Through its intermediary activities, it facilitates the exchange of goods and services, stimulates savings and channelizes these to productive investment. A healthy and stable banking system plays a crucial role in deciding the pace of development of an economy as it boosts the mobilization of funds and acts as a catalyst in the country’s growth process. Various researchers have empirically established the relationship between financial sector developments and economic growth (Bhattacharya & Sivasubramanian, 2003; King & Levine, 1993; Levine, 2004; Rajan & Zingales, 1998; C. Singh, 2005). Strengthening of banking system and its regulation has always been one of the central issues for the policymakers in an economy on account of its direct link with the overall economic performance. India is not an exception to it. Financial soundness of banking depends upon its asset quality and in the process of providing financial assistance to the investment projects, banking institutions face inherent risk known as default risk which creates non-performing assets (NPAs). Asset quality revealed in the form of NPAs of a bank is the actual expression of its credit risk management system. The timely information relating to NPAs works as a useful tool in examining the asset quality of banks (Meeker & Gray, 1987). NPAs affect the operative capability of the banks and successively affect the profitability, liquidity and solvency of those banks (Michael, Vasanthi, & Selvaraju, 2006). No doubt, to some extent, deterioration of assets is inevitable, but it is always appreciable if these distressed assets remain at its minimum with the vital contribution of the credit risk management system. Rising NPAs generally lead Management and Labour Studies 44(3) 263–284, 2019 © 2019 XLRI Jamshedpur, School of Business Management & Human Resources Reprints and permissions: in.sagepub.com/journals-permissions-india DOI: 10.1177/0258042X19848238 journals.sagepub.com/home/mls

6 citations

Posted Content
N. Ramu1
TL;DR: The mainstay of these banks was rooted in their captive clientele the forms of shareholders, and also in some cases specific community or location, which shielded them from the competition from large commercial banks as mentioned in this paper.
Abstract: Urban Cooperative Bank in India, with their long history of over 100 years, play an important role in financial inclusion. The mainstay of these banks was rooted in their captive clientele the forms of shareholders, and also in some cases specific community or location. This shielded them from the competition from large commercial banks. Recently, Indian banking industry has witnessed failure of a large number of Urban Cooperative banks. What are the reasons for these failures and what lays ahead for cooperative banks in India? This paper analyze the causes of concern and brings out some of the measures such as giving preferential treatment which would help urban cooperative banks to co-exist in the present competitive environment

3 citations


Cites background or methods from "Management of non performing advanc..."

  • ...Vision document The RBI formulated a draft vision document and placed it in the public domain in March 2005 with the objectives of (1) rationalizing the existing regulatory and supervisory approach keeping in view the heterogeneous character of entities in the sector, (2) enhancing...

    [...]

  • ...in cooperatives in some states since May 2001 (2) Interference in the form of superseding of board of directions and (3) Departmental interference in financial matters in various forms like...

    [...]

Journal Article
TL;DR: In this paper, the authors made comparative studies on impact of NPA on working of the State Bank of India (SBI) and the Punjab National Bank (PNB) during 2016-17, and observed that mainly due to the biggest infrastructure, the SBI had the largest volumes in terms of total assets, total business, total deposits, gross advances, priority sector advances, gross NPAs, Net NPAs.
Abstract: While making comparative studies on impact of NPA on working of the State Bank of India (SBI) and the Punjab National Bank (PNB) during 2016-17, it was observed that mainly due to the biggest infrastructure, the SBI had the largest volumes in terms of total assets, total business, total deposits, gross advances, priority sector advances, gross NPAs, Net NPAs, provisioning, total income, net interest income, other income, total expenses, operating profit and net-profit, etc. In addition, the bank was successful to contain its net NPAs among all PSBs at the lowest level. Another side, in terms of percentage growth, the PNB had higher growth in terms of total business, capital adequacy ratio (%), gross advances, other income, average return on assets (%), operating profit, per employee profit, net profit and lower growth in terms of cost of deposit (%), gross NPAs, net NPAs, provisioning, total expenses, cost to income ratio (%), etc. Therefore, overall the working performance of the PNB was more comfortable than the SBI, however, NPAs had bad impacts on overall profitability of both the banks’.

2 citations

Journal ArticleDOI
TL;DR: In this article , a structured questionnaire has been developed and data has been collected from officers in different banks in India, especially working in the credit department, which has been empirically tested for reliability and validity using confirmatory factor analysis (CFA) and also Z-test for checking the significance of explored and confirmed factors.
Abstract: The present article draws on the banker’s perspective and extracts some practical insights about the factors behind specific NPAs resolution strategies. Based on the thorough review of the perspective, conceptual and empirical literature, and using exploratory factor analysis (EFA), the study has identified 21 dimensions for ‘management of NPAs’. The empirical analysis of these dimensions has extracted 7 factors for management to be significant. A structured questionnaire has been developed and data has been collected from officers in different banks in India, especially working in the credit department. The questionnaire has been empirically tested for reliability and validity using confirmatory factor analysis (CFA) and also Z-test for checking the significance of the explored and confirmed factors. The present research work offers pragmatic suggestions for banking regulators, on improving the asset quality of banks in India and also throws new insights on effective credit management in banks. JEL Codes: G01, G21, G32, E44
References
More filters
Journal ArticleDOI
TL;DR: In this paper, the authors have empirically established the relationship between financial sector developments and economic growth and highlighted the importance of a healthy and stable banking system in deciding the pace of development of an economy as it boosts mobilization of funds and acts as a catalyst in the country's growth process.
Abstract: Within the broad realm of financial system, the banking system is one of the pivotal integrants as banks form the major part of financial institutions in India as well as worldwide (Gerschenkron, 1962; Jadhav & Ajit, 1996). Through its intermediary activities, it facilitates the exchange of goods and services, stimulates savings and channelizes these to productive investment. A healthy and stable banking system plays a crucial role in deciding the pace of development of an economy as it boosts the mobilization of funds and acts as a catalyst in the country’s growth process. Various researchers have empirically established the relationship between financial sector developments and economic growth (Bhattacharya & Sivasubramanian, 2003; King & Levine, 1993; Levine, 2004; Rajan & Zingales, 1998; C. Singh, 2005). Strengthening of banking system and its regulation has always been one of the central issues for the policymakers in an economy on account of its direct link with the overall economic performance. India is not an exception to it. Financial soundness of banking depends upon its asset quality and in the process of providing financial assistance to the investment projects, banking institutions face inherent risk known as default risk which creates non-performing assets (NPAs). Asset quality revealed in the form of NPAs of a bank is the actual expression of its credit risk management system. The timely information relating to NPAs works as a useful tool in examining the asset quality of banks (Meeker & Gray, 1987). NPAs affect the operative capability of the banks and successively affect the profitability, liquidity and solvency of those banks (Michael, Vasanthi, & Selvaraju, 2006). No doubt, to some extent, deterioration of assets is inevitable, but it is always appreciable if these distressed assets remain at its minimum with the vital contribution of the credit risk management system. Rising NPAs generally lead Management and Labour Studies 44(3) 263–284, 2019 © 2019 XLRI Jamshedpur, School of Business Management & Human Resources Reprints and permissions: in.sagepub.com/journals-permissions-india DOI: 10.1177/0258042X19848238 journals.sagepub.com/home/mls

6 citations

Posted Content
N. Ramu1
TL;DR: The mainstay of these banks was rooted in their captive clientele the forms of shareholders, and also in some cases specific community or location, which shielded them from the competition from large commercial banks as mentioned in this paper.
Abstract: Urban Cooperative Bank in India, with their long history of over 100 years, play an important role in financial inclusion. The mainstay of these banks was rooted in their captive clientele the forms of shareholders, and also in some cases specific community or location. This shielded them from the competition from large commercial banks. Recently, Indian banking industry has witnessed failure of a large number of Urban Cooperative banks. What are the reasons for these failures and what lays ahead for cooperative banks in India? This paper analyze the causes of concern and brings out some of the measures such as giving preferential treatment which would help urban cooperative banks to co-exist in the present competitive environment

3 citations

Journal Article
TL;DR: In this paper, the authors made comparative studies on impact of NPA on working of the State Bank of India (SBI) and the Punjab National Bank (PNB) during 2016-17, and observed that mainly due to the biggest infrastructure, the SBI had the largest volumes in terms of total assets, total business, total deposits, gross advances, priority sector advances, gross NPAs, Net NPAs.
Abstract: While making comparative studies on impact of NPA on working of the State Bank of India (SBI) and the Punjab National Bank (PNB) during 2016-17, it was observed that mainly due to the biggest infrastructure, the SBI had the largest volumes in terms of total assets, total business, total deposits, gross advances, priority sector advances, gross NPAs, Net NPAs, provisioning, total income, net interest income, other income, total expenses, operating profit and net-profit, etc. In addition, the bank was successful to contain its net NPAs among all PSBs at the lowest level. Another side, in terms of percentage growth, the PNB had higher growth in terms of total business, capital adequacy ratio (%), gross advances, other income, average return on assets (%), operating profit, per employee profit, net profit and lower growth in terms of cost of deposit (%), gross NPAs, net NPAs, provisioning, total expenses, cost to income ratio (%), etc. Therefore, overall the working performance of the PNB was more comfortable than the SBI, however, NPAs had bad impacts on overall profitability of both the banks’.

2 citations