A Study on Non-Performing Asset Management with Special Reference to Coimbatore City Co-Operative Bank Ltd, Tamilnadu

Abstract

A strong banking sector is important for flourishing economy. The failure of the banking sector may have an adverse impact on other sectors. Non-performing assets are one of the major concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset. The NPA growth involves the necessity of provisions, which reduces the overall profits and shareholders’ value.

The problem of NPAs is not only affecting the banks but also the whole economy. In fact high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade. The present study deals with understanding the concept of NPAs, its magnitude, its classification, the impact of priority sector lending and non priority sector lending on the total NPA, the impact of total NPA on profit of the bank by using various tools like Ratio analysis, correlation and trend analysis.

The study shows that Bank has slippages during the period of study in controlling of NPAs in the early years of the decade but later it reduces NPA and increase the provision to avoid net NPA and to avoid risk. Shareholders are free from risk for the last eight years of the study as the net NPA is zero. Substandard asset is more than doubtful and loss asset it shows that bank have good scope to recover its NPA. Priority sector contribute high towards total NPA especially loans to small scale industry have more NPA in priority sector. In non Priority sector mortgage loan is high. Bank has to take appropriate steps to improve recovery of NPA during initial stage itself and efforts are necessary to prevent creation of fresh NPAs.