Non Performing Asset

Int. J. Mgmt Res. & Bus. Strat.
2014
B Balaji Sathya Narayanan and R Surya, 2014

ISSN 2319-345X www.ijmrbs.com
Vol. 3, No. 3, July 2014
2014 IJMRBS. All Rights Reserved
A STUDY ON NON-PERFORMING ASSETS IN

INDIAN BANK
B Balaji Sathya Narayanan1* and R Surya1
*Corresponding Author: B Balaji Sathya Narayanan balaji098@yahoo.co.in
The economic progress of a nation and development of banking is invariably interrelated. The
Banking sector is an indispensable financial service sector supporting development plans through
channelizing funds for productive purpose, intermediating flow of funds from surplus to deficit
units and supporting financial and economic policies of the government. The importance of
banks stability in a developing economy is noteworthy as any distress affects the development
plans thereby the economic progress. The Indian Banking sector accounts a major portion of
financial intermediation and acknowledged as main vehicle for monetary policy signals, credit
channel and facilitator for payment systems. Bank serves social objective through its priority
sector lending, mass branch networks and employment generation. Maintaining asset quality
and profitability are critical for banks survival and growth. A major threat to banking sector is
prevalence of Non-Performing Assets (NPAs). NPA represent bad loans, the borrowers of which
failed to satisfy their repayment obligations. NPA in loan portfolio affects operational efficiency
which in turn affects profitability, liquidity and solvency position of the banks. Keeping this in
view, this study has been carried out to study the causes and effects of the Non-Performing
Assets in Indian bank and to provide constructive suggestions to reduce the same.
Keywords: NPA, Indian Bank, NPA Recovery, Impact of NPA
INTRODUCTION
The importance of banks stability in a

developing economy is noteworthy as any
distress affects the development plans thereby
the economic progress. The Indian Banking
sector accounts for a major portion of financial
intermediation and acknowledged as the main
vehicle for monetary policy signals, credit channel
and facilitator for payment systems.
The economic progress of a nation and

development of banking is invariably interrelated.
The Banking sector is an indispensable financial
service sector supporting development plans
through channelizing funds for productive
purpose, intermediating flow of funds from surplus
to deficit units and supporting financial and
economic policies of the government.
1
The importance of banks stability in a
Karaikudi Institute of Management, KIT & KIM Technical Campus (Affiliated to Anna University, Chennai), Keeranipatti, Thalakkavur,
Karaikudi 630 307, Sivaganga District , Tamil Nadu.
This article can be downloaded from http://www.ijmrbs.com/currentissue.php

144
Int. J. Mgmt Res. & Bus. Strat. 2014
competitive functioning, NPA also affects the

psychology of bankers in respect of their
disposition of funds towards credit delivery and
credit expansion. NPA generate a vicious effect
on banking survival and growth, and if not
managed properly leads to banking failures.
developing economy is noteworthy as any

distress affects the development plans thereby
the economic progress. The stability of banking
is a pre-requisite for economic development and
resilience against financial crisis. Like any other
business, success of banking is assessed based
on profit and quality of asset it possesses. Even
though bank serves social objective through its
priority sector lending, mass branch networks and
employment generation, maintaining asset quality
and profitability is critical for banks survival and
growth. A major threat to banking sector is a
prevalence of Non-Performing Assets (NPAs).
NPA represent bad loans, the borrowers of which
failed to satisfy their repayment obligations.
CAUSES OF NPA
Various reasons can be cited for an account
becoming NPA. An asset leads to NPA when the
borrower fails to repay the interest and/or principal
on agreed terms. The reasons for NPA are
classified differently; into causes.
Some of the important reasons for NPA, are
mentioned below:
NPA in loan portfolio affects operational

efficiency which in turn affects profitability, liquidity
and solvency position of banks. Keeping this in
view, this study has been carried out on the NonPerforming Assets in Indian bank.
1. Willful defaults, fraud, mismanagement and

misappropriation of funds.
2. Lack of proper pre-appraisal and follow up.
3. Improper selection of borrowers.
THE NON-PERFORMING
ASSETS
4. Under financing/untimely financing.
The stability of banking is a pre-requisite for

economic development and resilience against
financial crisis. Like any other business, success
of banking is assessed based on profit and quality
of asset it possesses. Even though bank serves
social objective through its priority sector lending,
mass branch networks and employment
generation, maintaining asset quality and
profitability is critical for banks survival and growth.
A major threat to banking sector is prevalence of
NPAs. NPA represent bad loans, the borrowers
of which failed to satisfy their repayment
obligations. NPA in loan portfolio affect operational
efficiency which in turn affects profitability, liquidity
and solvency position of banks. In addition to that,
the influence on profitability, liquidity and
6. Non-compliance of sanction terms and

conditions.
5. Delay in completing the project.
7. Poor debt management by the borrower,

leading to financial crisis.
8. Business failures.
9. Deficiencies on the part of the banks, viz., in
credit appraisal, monitoring and follow-ups.
10. Delay in settlement of payments\Subsidies
by government bodies, etc.
IMPACT OF NPA
The most important business implication of the
NPAs is that it leads to the credit risk management
assuming priority over other aspects of banks

145
functioning. The banks whole machinery would

thus be pre-occupied with recovery procedures
rather than concentrating on expanding business.
RBI, through various circulars, stipulated
guidelines to manage NPA. Thus NPA impact the
performance and profitability of banks. The most
notable impact of NPA is change in bankers
sentiments which may hinder credit expansion
to productive purpose. Banks may incline towards
more risk-free investments to avoid and reduce
riskiness, which is not conducive for the growth
of economy.
Correspondent Banks in 70 Countries.

Diversified Banking Activities -3 Subsidiary
Companies
The three subsidiaries of Indian Bank are Indbank
Merchant Banking Services Ltd., Indbank Housing
Ltd., and Indian bank mutual fund. A front runner
in specialized banking, 97 FOREX authorized
branches inclusive of 1 specialized overseas
branch at Chennai exclusively for handling
FOREX transactions arising out of export, import,
remittances and non resident Indian business
A Pioneer in Introducing the Latest
Technology In Banking
NPA results in harmful impact on the return on

assets. It happens in the following ways:
100% Core Banking Solution (CBS) branches,

100% business computerization, 1322 Automated
Teller Machines (ATM), 24 x 7 service through
more than 99,242 ATMs under shared network,
Internet and tele-banking services to all core
banking customers, E-payment facility for
corporate customers, Cash management
services, Depository services, Reuter screen,
telerate, reuter monitors, dealing system provided
at overseas branch, I B Credit Card Launched, I
B Gold Coin, I B Prepaid Cards Launched (Gift
Card, International Travel Card), RTGS and NEFT
Remittance Facilities Available At All CBS
Branches. Indian Bank has entered into a strategic
tie-up with HDFC Standard Life Insurance
Company Limited.
1. The interest income of banks will fall and it is

to be accounted only on receipt basis.
2. Banks profitability is affected adversely
because of the provision of doubtful debts and
consequent write off as bad debts.
3. Return on Investment (ROI) is reduced.
4. The cost of capital or Interest on Loan will go
up.
Corporate Profile Indian Bank

A premier bank owned by the government of India.
Established on August 15, 1907 as part of the
Swadeshi movement. Serving the nation with a
team of over 18782 dedicated staff. Total business
crossed Rs. 2,11,988 cr as on 31.03.2012.
Operating profit increased to Rs. 3,463.17 cr as
on 31.03.2012. Net profit increased to Rs. 1746.97
cr as on 31.03.2012. Capitalize C in Core , B in
Banking and S in Solution (CBS) in all 2089
branches as on 31st March, 2013.
SCOPE OF THE STUDY

The study is significant for several reasons. First
and foremost, it explains causes and effects of
Non-Performing Assets, which contributed to
transformational changes in banking since
liberation, i.e., 1991.
International Presence
Overseas Branches In Singapore, Colombo
Including a Foreign Currency Banking Unit At
Colombo And Jaffna and Have 240 Overseas
According to Mr. T M Bhasin, CMD, Indian

Bank, the year 2012-13 was highly challenging

146
for the entire banking industry and Indian bank

was no exception to it. Though the bank grew
over 17% in total business, the profitability
endured due to additional provisioning the bank
made against the increased NPA. The NPA for
the Financial Year 2013 was at Rs. 1000 cr. With
this background the bank aims to target is to bring
down their gross NPA to below 3% and net NPA
to less than 2%1.
3. To predict the Non-Performing Assets and baddebts that could be written-off by the Indian
Bank.
4. To provide suggestion to the branch office for
efficient loan recovery and Non-Performing
Assets Management.
STATEMENT OF
HYPOTHESES
Banking regulators and financial experts

focused their attention to curb the menace of NPA,
but it still remains disturbing the performance of
the banks progress.
Following two hypotheses are to be tested using

paired t-test and One Sample T-Test
H 1: There is a significant difference in the
As a part of recovery of Bad Loans, banks

today resort to a tactical approach where they
publish loan defaulters photos in leading
newspapers. But in the month of August 2013,
Calcutta High Court ruled that publishing loan
defaulters photos in dailies is illegal. This is a big
blow to all commercial banks which are fighting
to curb NPA ratio by initiating this kind of steps to
recover bad loans for the defaulting borrowers.2
Operating Profits of Indian Bank before and after

the bad debts were written-off.
H2: There is a significant increase in Indian Banks
NPA
RESEARCH METHODOLOGY
Research Design
The study is descriptive in nature, as it attempts
Even though NPA ratios indicate significant

improvements in reduction of NPA, it may not
clearly indicate the clear picture on NPA trends.
This study is useful since it provides an
understanding on whether Indian bank could
manage its NPA effectively during this postmillennium period.
to study and describe the impact of NonPerforming Assets on the revenue and the
profitability of Indian Bank.
Sample Design
The Population and Sample data on all above
variables are collected from the Annual Reports
OBJECTIVES OF THE STUDY
of the Indian Bank for the preceding 6 years from
The proposed objectives of the study are as

follows:
2007 to 2012.
1. To identify the factors accounting for bad loans.
The study involves collection of primary and
2. To measure the impact of Non-Performing

Assets on Indian Banks Financial Performance.
secondary data. The researcher has used the
Data Collection
Interview Schedule to collect the primary data
http://www.thehindubusinessline.com/industry-and-economy/banking/we-will-continue-with-aggressive-recovery-drive-to-reduce-npas/
article4699508.ece
http://taxguru.in/finance/publishing-loan-defaulters-photos-newspapers-illegal.html

147
directly from the Office, Loans Section of Indian
Impact of Bad Debt on Profit
Bank, Pallathur, Sivaganga District, Tamil Nadu.
Year
Operating
Profit Before
Bad Debt
Written-Off
(in Cr.)
Bad
Debt
WrittenOff
Operating
Profit After
Bad Debt
Written-Off
(in Cr.)
Ratio of
Bad
Debt to
Operating
Profit
various magazines, newspapers, and websites
2008
1659
425.24
1233.76
34.47%
were also used to elicit secondary data.
2009
2056
40.39
2015.61
2.00%
Data Processing
2010
2747
381.53
2365.47
16.13%
The data were processed through a master table.

With the help of master table, uni-variate, bi-variate
and multi-variate data tables were constructed.
2011
3292
662.48
2629.52
25.19%
2012
3463
654.74
2808.26
23.31%
The Interview Schedule is framed in such a

manner so that it covers all the details required
for the study. Indian Banks Annual Reports,
H0: There is no significant difference in the
Frame Work for Data Analysis
Percentage analysis is widely used in this study.

A statistical tool Arithmetic Mean has been used.
Time Series is used for predicting the future NPAs
and probable bad debts that could be written-off
in the forthcoming years by the Indian Bank. Test
statistics such as t-test, has been used to test
the hypotheses. Pie charts have also been
presented for easy understanding.

H 1 : There is a significant difference in the
the bad debts were written-off
Rule for Interpretation

SPSS Output Analysis
If the (P-Value) significance value < Level of
Significance >>> Reject Ho
LIMITATIONS OF THE STUDY

A Study On Non-Performing Assets In Indian
If the (P-Value) significance value > Level of

Significance >>> Accept Ho
Bank, is confined to preceding 6 years, i.e., from

2007 to 2012 only. Hence the results of the study
Calculated
t- Value
may not be generalized and not universally
Degrees of
Freedom
(df)
Level of
Significance
Test
Type
Sig.
Value
(p-value)
3.806
5% or 0.05
2 Tail Test
0.019
Outcome
Since the calculated significance (p) value

0.019 is less than the level of significance
0.05, the researcher rejects H0 and accepts H1.
Result
There is a significance difference in the

Operating Profits of Indian Bank before
and after the bad debts were written-off
applicable. No customers were interviewed as a

part of the research work, as it is against the
policy of the bank to not to allow an outsider or a
non-employee to converse with the borrowers.
HYPOTHESIS TESTING
Test -1: Before After Paired t-Test.
Test 2: One Sample T-Test
To test whether the bad debts written-off had
To find whether NPAs of Indian Bank is increasing

year after year in large scale from 2008 till
2012.
impacted the operating profits of the Indian Bank

over the last 5 years from 2008 to 2012:

148
NPA of Indian Bank
Objective-1: The Factors Accounting For Bad

Loans. Based on the formal interview with the
Branch of Indian Bank, Pallathur, Sivaganga
District, Tamil Nadu, India, following are the key
factors contributing for bad loans:
Year
Amount (in cr)
2008
97.59
2009
93.81
2010
144.93
2011
397.04
2012
11196.83
Calculated
t- Value
1. Economic Slowdown in India.

2. Borrowers lack of business management
knowledge.
Degrees of
Freedom
(df)
Level of
Significance
Test
Type
Sig.
Value
(p-value)
1.083
5% or 0.05
Two-Tailed
0.340
Outcome
Since the calculated significance (p) value

0.340 is greater than the level of significance
0.05, the researcher accepts H0 and rejects H2
Result
There is no significant increase in Indian

Bank's NPA
Conclusion
Thus, it is statistically proved that there is

no significant increase in Indian Bank's
NPA over the last 5 years from 2008 to 2012.
3. Borrowers lack of business experience and

marketing.
4. Lethargic customers do not care to repay the
borrowed loans.
5. Political influence and interferences.
6. Ineffective monitoring of repayment of loans
by the bank.
Furthermore, it is found from the research, that
following factors hinder effective monitoring of
recovery of loans from the customers:
1. Understaffing in the branch office.
H0: There is no significant increase in Indian

Banks NPA
2. Lack of logistic support to the collection officer

by the office.

NPA
3. Poor road connectivity or facility to reach or

inspect the progress in the project site of the
borrowers.
DISCUSSION ON FINDINGS
OF THE RESEARCH STUDY
Objective-2: Measuring the impact of NonPerforming Assets on Indian Banks Financial

Performance.
The objectives of the study are as follows:

1. To identify the factors accounting for bad loans.
1. Indian banks the Average Gross NPA Ratio for

the last 6 years was 1.30%, Average Net NPA
Ratio for the last 6 years from 2007 to 2012,
was 0.48%, the highest NPA 1.33% prevailed
in 2012 and the lowest 0.18% NPA prevailed
in 2009.
2. To measure the impact of Non-Performing

Assets on Indian Banks Financial
Performance.
3. To predict the Non-Performing Assets and baddebts that could be written-off by the Indian
Bank.
2. The Indian Banks Average amount of NPA for

the last 5 years, from 2008 to 2012 is Rs.
2386.04 and Average Net NPA Ratio for the
The findings of each of the above cited

objectives are as follows:

149
Rs. 865.312 cr, and Rs. 973.421 cr,

respectively. This indicates that the probable
bad-debts of Indian Bank that could be writtenoff for the period between 2013 and 2015 could
also see an upward swing.
last 5 years is 0.502%, highest amount of NPA

Rs. 11196.83 prevailed in 2012 and the lowest
amount of NPA Rs. 93.81 prevailed in 2009.
3. The Highest proportion of bad debt to loan
interest income 8.16% prevailed in 2008 and
the lowest proportion 0.59% prevailed in 2009.
HYPOTHESIS FINDINGS
4. The highest loan interest income amount of

Indian Bank Rs. 12,231 was earned in 2012
and the lowest amount of interest income Rs.
5,213 was earned in 2009.
Following two hypotheses are tested using paired

t-test and One Sample t-test
H 1 : There is a significant difference in the
5. Highest amount of bad debt of Rs. 662.48 was

written-off in 2011 and the lowest amount of
bad debt Rs. 40.39 was written-off in 2009.

NPA
6. Highest ratio of Bad Debt to Operating Profit

prevailed in 2008 at the rate of 34.47%, where
the Operating Profit declined from Rs. 1659
to Rs. 1233.76, after the bad debt is written off
by the bank. Similarly the lowest ratio of Bad
Debt to Operating Profit prevailed in 2009
where the Operating Profit declined marginally,
from Rs. 2056 to Rs. 2015.61, after the bad
debt is written off by the bank
The results of the tests are as follows:

1. There is a significance difference in the Operating
Profits of Indian Bank before and after the bad
debts were written-off. Thus, it is statistically
proved that the bad debts written-off had
impacted the operating profits of the Indian Bank
over the last 5 years from 2008 to 2012.
2. There is no significant increase in Indian
Banks NPA. Thus, it is statistically proved that
there is no significant increase in Indian Banks
NPA over the last 5 years from 2008 to 2012.
7. The highest NPA prevailed in 2012 against the

total advances made at the rate of 1.33% and
the lowest NPA prevailed in 2009 with 0.18%
against the total loans given by the Indian Bank.
SUGGESTIONS
Following are some of the suggestions for
Reducing NPAs in Indian Bank:
Objective-3: To predict the Non-Performing

Assets and bad-debts that could be written-off
by the Indian Bank
1. Reduce Installment Amount and Increase

Number of Installments.
a) Trend values or the probable non-performing

assets for the year 2013, 2014 and 2015 could
be seen at Rs. 9136.553 cr, Rs. 11386.724 cr,
and Rs. 13636.895 cr, respectively, which
simply means that the probable NPAs of Indian
Bank for the period between 2013 and 2015
could see an upward swing.
Indian Bank may increase the number of

installments payable by borrowers by reducing
the amount of installments in order to recover
the loan.
2. Lok Adalats (Peoples Court):
The parties, viz., the Lenders and borrowers
shall look forward to an amicable settlement
either through out-of-court settlement or
through Peoples Court.
b) Trend Values or Probable Bad-Debts that

could be written-Off for the year 2013, 2014
and 2015 are expected to be Rs. 757.203 cr,

150
are very cautious in extending loan, because of

mounting NPA.
3. Debt Recovery Tribunal

It was set up under the recovery of debts due
to banks and Financial Intuitions Act, 1993 with
exclusive jurisdiction to try and dispose of
matters pertaining to recovery of debts due to
bank and financial assets. It has the potential
of playing a significant role in NPA realization.
Parties can settle their dispute through this
mechanism by taking this as a last resort.
This Research Study highlights the reasons

for an assets becoming NPA and remedial
measures to be taken to trim down the NPA.
From the analysis, it is evident that NPA still
remains a major concern for banks in India. Even
though the NPA during the last five years has not
increased drastically and continually, it still remains
a big challenging when it comes to recovery of
bad loans. The recessionary pressure faced by
the banking sector is an important reason for the
growth of NPAs. It should be managed to maintain
a healthy and viable banking environment.
4. CIBIL:
Make borrowers realize that if they default in
repayment of their loans, then their name
would get registered with CIBIL which means
they are black listed and it impacts the
borrowers credit history, which means one
cannot borrow any loan from any bank.
The increased level of additions to NPA remained

as an area of concern as it indicates the real
efficiency of credit risk management. Banks today
take pro-active measures to control Non-Performing
Assets along with the assistance of Finance Ministry
and the Reserve Bank of India. Indian Bank is doing
its level best to trim down its NPA and will definitely
succeed by following the right legal and diplomatic
ways to recover the same.
5. Collection staff for the branch office:

Collection officers for recovery of loans may
be appointed on regular basis or contractual
basis. This would not only reduce the burden
of the branch staff on recovery of loans but
also could help to reduce the NPA to a
measurable extent.
BIBLIOGRAPHY
6. Logistic support for Collection staff for the

branch office:
Books
A special vehicle along with travelling and petrol

allowance support may be provided to the
collection officers so as to facilitate them to
recover the loans.
1.
Kothari C R (1990), Research Methodology,

Methods & techniques published by Wishwa
prakasan
2.
Guptha S.P- statistical method -20002

Edition- Sulthan Chand & sons, New Delhi
The main objective of the project entitled A Study

on Non-Performing Assets in Indian Bank, is to
investigate the impact of Non-Performing Assets
on the profitability of Indian Bank.
3.
Indian Bank -Annual Report, 2007
4.
Indian Bank-Annual Report, 2008
5.
Banking industry has undergone a major

change after the first phase of economic
liberalization; hence, the importance of credit
management has emerged. In recent times banks
6.
7.
8.
CONCLUSION

151
WEBSITES
1.
npa-and-impact-on-indian-economy8146.as
http://www.indian-bank.com/annual_
report.php
2.
http://www.rbi.org.in/SCRIPTs/Publication
ReportDetails.aspx?UrlPage=Reporton
Currencyand Finance&ID=502
3.
http://www.caclubindia.com/articles/banks-
RESEARCH PAPERS
1.
Poongavanam S (2011), Non performing

assets: Issues, Causes and remedial
Solution, Asian Journal of Management
Research, Vol. 3, No. 2, pp. 123-132.
ANALYSIS AND INTERPRETATION

Exhibit 1: Gross Non-Performing Assets and Net Non-Performing Assets
Year
Gross Non Performing - Loans (%)Ratio
Net NPA Ratio
2007
1.85%
0.35%
2008
1.21%
0.24%
2009
0.89%
0.18%
2010
0.81%
0.23%
2011
0.98%
0.53%
2012
2.03%
1.33%
Note: 1. Average Gross NPA Ratio for the last 6 years = 1.30%; 2. Average Net NPA Ratio for the last 6 years = 0.48%; 3. Highest NPA
1.33% prevailed in 2012 and the lowest 0.18% NPA prevailed in 2009.
Exhibit 2: Net Non-Performing Assets and Net NPA Ratio

Year
Gross Non Performing - Loans (%)Ratio
Net NPA Ratio
2008
97.59
0.24%
2009
93.81
0.18%
2010
144.93
0.23%
2011
397.04
0.53%
2012
11196.83
1.33%
Statistical Inference: 1. Average amount of NPA for the last 5 years Rs. 2386.04; 2. Average Net NPA Ratio for the last 5 years = 0.502 %;
Highest amount of NPA Rs. 11196.83 prevailed in 2012 and the lowest amount of NPA Rs. 93.81 prevailed in 2009.

152
Exhibit 3: Impact of Bad Debts on Loan Interest Income

Year
Loan Interest Income (in Cr.)
Bad Debt Written-off
Ratio of Bad Debt to Loan Interest Income (%)
2008
5213
425.24
8.16
2009
6830
40.39
0.59
2010
7714
381.53
4.95
2011
9361
662.48
7.08
2012
12231
654.74
5.35
Statistical Inference: 1. Average amount of Interest Income = Rs. 8269.8; 2. The highest loan interest income = Rs. 12231 (2012); 3. The lowest
amount of interest income = Rs. 5213 (2008); 4. The Average amount of bad debts written off = 432.876.
STATISTICAL ANALYSIS
1. Formulation of linear equation that predicts the probable NPA of Indian bank for 2013, 2014 and 2015:
Year (x)
NPA Amount (in Crs.) (Y)
x=X-Xbar
Square of x
xY
2008
97.59
-2
-195.18
2009
93.81
-1
-93.81
2010
144.93
2011
397.04
397.04
2012
11196.83
22393.66
Assets During 2013 and 2015

Year (x)
N (No. of Years)
Probable Non-Performing Assets (Y)
2010
2013
9136.553
Sum of Y
11930.2
2014
11386.724
Sum of Xy
22501.71
2015
13636.895
x-bar
10
Sum of Square of x
Statistical Inference:
Above linear equation shows that the probable NPAs of Indian
Bank for the period between 2013 and 2015 could see upward
swing.
Formulation of linear equation that predicts the probable baddebts of Indian bank for 2013, 2014 and 2015:
Linear Equation: Y = a + b x
Year (x)
A
2386.04
Year
Y=a+bx
2250.171
2013
Y =2386.04 + 2250.171 (3) =
2014
Y =2386.04 +2250.171 (4) =
2015
Y =2386.04 +2250.171 (5) =
Trend Values or Probable Non-Performing
Bad Debt Written-Off (Y) x=X-Xbar Square of x
2008
425.24
-2
2009
40.39
-1
2010
381.53
2011
662.48
2012
654.74

153
N (No. of Years)
x-bar
2010
Sum of Y
2164.38
Sum of xY
1081.09
Sum of Square of x
10
Linear Equation: Y = a + b x
A
432.876
Year
Y=a+bx
108.109
2013
Y = 432.876+108.109 (3) =757.203
2014
Y = 432.876+108.109 (4) =865.312
2015
Y = 432.876+108.109 (5) =973.421
Trend Values or Probable Bad-Debts that could be writtenOff during 2013 and 2015
Year (x)
Probable Bad Debt Written-Off (Y)
2013
757.203
2014
865.312
2015
973.421
Statistical Inference:
Above linear equation shows that the probable bad-debts of Indian
Bank that could be written-off for the period between 2013 and
2015 could see an upward swing.

154

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Int. J. Mgmt Res. & Bus. Strat.

B Balaji Sathya Narayanan and R Surya, 2014

A STUDY ON NON-PERFORMING ASSETS IN

*Corresponding Author: B Balaji Sathya Narayanan balaji098@yahoo.co.in

The importance of banks stability in a

The economic progress of a nation and

The importance of banks stability in a

This article can be downloaded from http://www.ijmrbs.com/currentissue.php

Int. J. Mgmt Res. & Bus. Strat. 2014

B Balaji Sathya Narayanan and R Surya, 2014

competitive functioning, NPA also affects the

developing economy is noteworthy as any

NPA in loan portfolio affects operational

1. Willful defaults, fraud, mismanagement and

4. Under financing/untimely financing.

The stability of banking is a pre-requisite for

6. Non-compliance of sanction terms and

5. Delay in completing the project.

7. Poor debt management by the borrower,

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Int. J. Mgmt Res. & Bus. Strat. 2014

B Balaji Sathya Narayanan and R Surya, 2014

functioning. The banks whole machinery would

Correspondent Banks in 70 Countries.

NPA results in harmful impact on the return on

100% Core Banking Solution (CBS) branches,

1. The interest income of banks will fall and it is

Corporate Profile Indian Bank

SCOPE OF THE STUDY

According to Mr. T M Bhasin, CMD, Indian

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Int. J. Mgmt Res. & Bus. Strat. 2014

B Balaji Sathya Narayanan and R Surya, 2014

for the entire banking industry and Indian bank

Banking regulators and financial experts

Following two hypotheses are to be tested using

As a part of recovery of Bad Loans, banks

Operating Profits of Indian Bank before and after

Even though NPA ratios indicate significant

OBJECTIVES OF THE STUDY

of the Indian Bank for the preceding 6 years from

The proposed objectives of the study are as

1. To identify the factors accounting for bad loans.

The study involves collection of primary and

2. To measure the impact of Non-Performing

secondary data. The researcher has used the

Interview Schedule to collect the primary data

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Int. J. Mgmt Res. & Bus. Strat. 2014

B Balaji Sathya Narayanan and R Surya, 2014

directly from the Office, Loans Section of Indian

Impact of Bad Debt on Profit

Bank, Pallathur, Sivaganga District, Tamil Nadu.

various magazines, newspapers, and websites

were also used to elicit secondary data.

The data were processed through a master table.

The Interview Schedule is framed in such a

H0: There is no significant difference in the

Frame Work for Data Analysis

Operating Profits of Indian Bank before and after

Percentage analysis is widely used in this study.

the bad debts were written-off.

Rule for Interpretation