Analysis of Loan Portfolio of Public Sector Banks in India

Dr. Pooja Lekhi .


Purpose: Banking sector have paramount role in every economy. Financial soundness of banks depends upon the quality of assets it has. Major proportion of assets comprises of loans and advances and investments. Efficient management of these assets is most essential to ensure profitability and viability of a bank. If these assets are of poor quality, then it leads to addition in provision for NPA, and depreciation of investment. Higher provisions decline the profits of bank. Hence quality of assets holds supreme and notable impact on profitability of banks. In this paper an attempt has been made to evaluate the loan portfolio of selected private sector banks. This paper incorporates quality management of loan portfolio of selected banks by analysing position of non-performing advances, movement of gross and net NPAs, for a period of ten years i.e. from 2006-07 to 2015-16. Methodology: The universe of our study consists of all public sector banks operating in India. Four public sector banks have been selected on the basis of average gross NPAs. Last three years average of gross NPAs to loan outstanding ratio was calculated. Two banks with highest average ratio and two with lowest ratio was selected as a sample for this study. Study is based upon secondary data collected from annual reports of selected banks and RBI reports for a period of ten years i.e. 2007 to 2016. Suitable mathematical and statistical tools such as Coefficient of variation, compound growth rates, T-test had been used to analyze the data and draw the conclusions. Findings: It has been observed that gross NPA and net NPA in had significantly increased in absolute terms as well as percentage terms in all public banks. Furthermore, additions in gross NPA had been observed as greater than reduction in gross NPA at certain point in banks which is alarming to banks, so it needs to take measures to reduce the increasing level of NPA steps must be taken to reduce it. Implications: The study implies that Strict and well-planned follow-up must be adopted to monitor the progress of project financed by bank, so that quality of bank assets i.e. loan may be maintained. Banks must establish “risk analysis and management” department to continuously examine the loan portfolio. Originality: Till now, no researcher has reported such type of study, and the available literature is limited to NPAs in general, without considering movement of Gross and net NPA, additions, reductions provisions of past ten years in particular.


Public Sector Banks, Gross NPAs, Net NPAs, Provisions.

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