PROJECT REPORT

(SUBMITTED FOR THE DEGREE B.COM HONOURS ACCOUNTING AND FINANCE UNDER THE UNIVERSITY OF CALCUTTA)

Title of The Project

“A STUDY ON NON-PERFORMING ASSETS

OF STATE BANK OF INDIA”

NAME OF THE CANDIDATE: Tannishtha Roy Chowdhury

CU REGISTRATION NO: 047-1211-0594-21
CU ROLL NO: 211047-110253
COLLEGE ROLL NO: 211270
Supervised by:

MONTH AND YEAR OF SUBMISSION

MONTH:
YEAR:
Annexure-IA

Supervisor's Certificate
This is to certify that Ms. Tannishtha Roy Chowdhury a student of B.Com.
Honors in Accounting & Finance in Business of Sivnath Sastri College under the
University of Calcutta has worked under my supervision and guidance for
his/her Project Work and prepared a Project Report with the
Title,
A STUDY ON NON-PERFORMING ASSETS OF STATE BANK OF INDIA
Which she submits is her genuine and original work to the best of my
knowledge.

Signature:

Place: Name: Prof.

Date: Designation:
A NNEXURE -IB

S TUDENT ' S DECLARATION

I hereby declare that the Project Work with the A STUDY ON NON-PERFORMING ASSETS OF
STATE BANK OF INDIA submitted by me for the partial fulfilment of the degree of B.Com.
Honours in Accounting & Finance under the University of Calcutta is my original work and
has not been submitted earlier to any other University /Institution for the fulfilment of the
requirement for any course of study. I also declare that no chapter of this manuscript in
whole or in part has been incorporated in this report from any earlier work done by others or
by me. However, extracts of any literature which has been used for this report have been
duly acknowledged providing details of such literature in the references.

Signature:
Place: Name:

Date: Registration No:

Name of the College:
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are not numerous, and the depth is
so enormous. I would like to acknowledge the following as being idealistic channels and
fresh dimensions in the completion of this project. I take this opportunity to thank the
University of Mumbai for giving me the chance to do this project. I would like to thank my
supervisor Prof. Sujata Dutta for providing the necessary facilities required for the
completion of this project. I take this opportunity to thank you for her moral support and
guidance. I would like to thank SBI Website, for having provided various references for my
project.
 Chapter Topic Page No.
1.1 Background of the study 06
1.2 Importance of the study 06

1 1.3 literature Review

1.4 OBJECTIVES OF THE STUDY
07
10
Introduction 1.5 Methodology of the study 09
1.6 Limitations of the Study 10
1.7Chapter Planning 10

2.1 Meaning and Types of NPA 11

2
Conceptual
2.2 NPA at SBI
Framework 14

3.1 Total Asset 20

3.2 Capital Adequacy 21
3.3 Comparison of Agricultural and allied Activities 22
3 loan and NPA Amount of NPA on Loans (In Crores)
3.4 Comparison of Loans for industry sector and NPA 23
Analysis And 3.5 Comparison of Loans for Service Sector and NPA 24
Findings 3.6 Comparison of Personal Loans and NPA 25
3.7 Gross NPA Ratio
27
3.8 NET NPA RATIO
28
3.9 Provision Ratio
29

Conclusion
4 30

Conclusion &
Recommendation Recommendation 30

31
Bibliography
Chapter 01 Introduction

1.1 Background of the Study

India being a developing country has been progressing since independence with the great support of

banking system in the country. The role of commercial banks in the progress of the country is considered

as a benchmark. For the high rate of capital formation, the role of commercial bank has no other

alternative. But India needs a great amount of development and growth for the time to come where again

the banking system will become a milestone, but the banking system has only one big issue that is of

Non-Performing Assets.

In general, the non-performing assets are found more comparatively in the public sector banks in

comparison to private banks because of liberal rules for debt recovery. Now a days the RBI has issued

strict guidelines to reduce NPA, s in the banks and due to that the proportion of NPA, s has reduced up to

the extent but not all together. In the present paper a study is conducted to check the NPA, s of State Bank

of India during 2018-19 to 2022-23 and suggestion to reduce the NPA, s has also been drawn.

1.2 Importance of the study

Financial Stability: Analyzing NPAs helps in assessing SBI's financial stability, identifying
areas of weakness, and developing strategies to mitigate risks.
Investor Confidence: The study sheds light on the bank's ability to manage NPAs effectively,
which is vital for maintaining investor confidence and safeguarding shareholder value.
Regulatory Compliance: By understanding the regulatory framework surrounding NPAs, SBI
can ensure compliance with guidelines set by regulatory authorities like the RBI.
Strategic Decision-Making: Insights from the study aid in formulating strategic initiatives to
address NPAs, enhance asset quality, and improve overall performance.
Market Perception: The study's findings influence market perception of SBI's financial health
and reputation, impacting its competitiveness and growth prospects in the banking sector.
1.3 literature Review

Introduction to NPAs:
Non-Performing Assets (NPAs) are loans or advances that have stopped generating income for a
bank due to non-payment by the borrower. They are categorized based on their repayment status
and duration of delinquency.
Importance of Managing NPAs:
Managing NPAs is crucial for maintaining financial stability and the overall health of the
banking sector. High NPA levels can erode banks' profitability, weaken their capital adequacy,
and undermine investor confidence. Effective management of NPAs is essential to mitigate risks,
safeguard depositors' funds, and promote sustainable growth in the banking industry.
Impact of NPAs on SBI:
Financial implications: Analysis of the effect of NPAs on SBI's profitability, capital adequacy,
and provisioning requirements.
Reputation risk: Assessment of the impact of high NPA levels on SBI's reputation, investor
confidence, and market perception.
Strategic implications: Evaluation of the strategic initiatives undertaken by SBI to address
NPAs and restore asset quality.
In managing NPAs, SBI conducts a comprehensive SWOT analysis to assess its strengths,
weaknesses, opportunities, and threats. Leveraging its strong market presence and extensive
branch network, SBI capitalizes on its robust risk management framework and technological
capabilities for data analytics and automation. However, challenges persist with legacy systems
and regulatory obligations, compounded by historically high NPA levels. Yet, SBI sees
opportunities in digital transformation, strategic partnerships with fintech firms, and asset
reconstruction. Nonetheless, it remains vigilant against economic downturns, legal and
regulatory risks, and competitive pressures within the banking sector, ensuring a balanced
approach to NPA management.
I NCREASING NPA

The asset quality of banks is one of the most important indicators of their financial health. It also
reflects the efficiency of banks’ credit risk management and the recovery environment.
The Indian banks have shown very good performance as far as the financial operations are
concerned. But non- performing assets (NPA) has caused some concerns. Despite write- offs
gross NPAs have continued to rise significantly. The new accretion to NPAs has been much
faster than the reduction in existing NPAs due to lower levels of upgradation and recoveries. To
improve the banks’ ability their non –performing assets (NPAs) and restructured accounts in an
effective manner and considering that almost all branches of banks have been fully
computerized, the Reserve bank of India in its monetary policy statement 2012- 13 proposed the
following measures:
• To mandate banks to put in place a robust mechanism for early detection of signs of distress,
and measures, including prompt restructuring in the case of all viable accounts wherever
required, with view to presenting the economic value such accounts: and
• To mandate banks to have proper system generated- wise data on their NPA accounts, write
offs, compromise settlement, recovery and restructured accounts. Despite these concerns, it is
projected that the Indian banking industry will grow through leaps and bounds looking at the
huge growth potential of Indian economy. High population base of India, rising disposable
income, etc. will drive the growth of Indian banking industry in the long- term.

1.3 OBJECTIVES OF THE STUDY

• To assess the impact of NPAs on SBI's financial performance and reputation.

• To examine the factors contributing to NPAs within SBI.

• To evaluate the effectiveness of SBI's existing strategies in managing NPAs.

• To identify areas for improvement in SBI's NPA management practices.

• To compare SBI's NPA levels with industry benchmarks and peer banks.

• To provide insights and recommendations for enhancing SBI's NPA management

framework.

• To strengthen SBI's overall financial health through improved NPA management.

1.4 Methodology of the Study

The research conducted is to analyze the NPA management in SBI. The nature of research is
exploratory as well as diagnostic. This study is based on the secondary data only of SBI Group.
The various data provided by them, the RBI Circulars, journal, magazines, data from internet
will be studied and interpretation made thereof.

• T HE DATA USED IN IT :
Secondary data refers to the data which has already been generated and is available for use. The
data is taken from Reserve Bank of India website, SBI website and journals. Secondary
information is also obtained by the medium of internet, books and the journals of various
Management schools and the government web portals.
• Period of the study: - the period of the study is done based on availability of data.
The data are collected i.e from 2013-14 to 2022-23.

In studying Non-Performing Assets (NPAs) at State Bank of India (SBI), various methods
and approaches may be employed to assess the nature, extent, and impact of NPAs on the
bank's financial health and operations. Some common methods used in NPA study at SBI
include:

• Data Analysis: Analyzing historical loan data to identify trends in NPA levels, sector-
wise distribution, classification, and provisioning. This involves quantitative analysis of
loan portfolios to track changes in NPA ratios over time.

• Asset Quality Review (AQR): Conducting a comprehensive review of the bank's loan
assets to assess their quality and identify potential NPAs. AQR involves detailed scrutiny
of borrower profiles, collateral valuation, repayment schedules, and adherence to
prudential norms.

• Risk Assessment: Evaluating the risk factors contributing to NPAs, including credit risk,
operational risk, market risk, and liquidity risk. Risk assessment involves qualitative and
quantitative analysis to identify high-risk sectors, borrowers, and loan products.

• Stress Testing: Subjecting the bank's loan portfolio to stress tests to assess its resilience to
adverse economic scenarios, such as economic downturns, interest rate fluctuations, and
sectoral distress. Stress testing helps identify potential NPA vulnerabilities and assess the
adequacy of provisioning.
L OAN C LASSIFICATION AND P ROVISIONING : Reviewing the bank's loan classification
process to ensure compliance with regulatory guidelines and accounting standards. Assessing the
adequacy of loan loss provisions to cover potential credit losses associated with NPAs.
P ORTFOLIO D IVERSIFICATION A NALYSIS : Analyzing the composition of the bank's loan
portfolio to assess the degree of concentration risk and diversification across sectors, geographies,
and borrower segments. Identifying overexposure to high-risk sectors prone to NPAs.
R EGULATORY C OMPLIANCE R EVIEW : Ensuring compliance with regulatory requirements
and guidelines issued by the Reserve Bank of India (RBI) regarding NPA recognition,
classification, provisioning, and resolution. Reviewing the bank's adherence to prudential norms
and asset quality parameters.

P ERIOD OF THE STUDY -

The period of the study is done on the basis of availability of data. The data are collected i.e.
from the SBI official website Annual Reports.

1.5 Limitations of the Study

• This study is only restricted to State Bank of India only.
• The result of the study may not be applicable to any other banks.
• The conclusion of the study is based on the secondary Information. Thus, some
amount of subjectivity might remain.

1.6 Chapter Planning

My project has been carried out through the following chapters:

• Chapter 01 Introduction

• Chapter 02 Conceptual Framework

• Chapter 03 Presentation and Analysis of Data

• Chapter 04 Conclusion and Recommendation

Chapter 02 Conceptual Framework

2.1 Meaning and Types of NPA

NPA stands for Non-Performing Asset. It refers to a classification used by financial institutions,
typically banks, to categorize loans or advances that are in default or where payments of interest
and principal are overdue for a specified period, usually 90 days or more. In simpler terms, an NPA
is a loan or advance for which the borrower has failed to make timely payments of principal and
interest as per the agreed terms of the loan agreement.

Features of NPAs:

1. Defaulted Loans: NPAs represent loans where borrowers have defaulted on repayment obligations for a
specified period, typically 90 days or more.

2. Classification Criteria: NPAs are classified based on criteria set by regulatory authorities,
distinguishing between substandard, doubtful, and loss assets.

3. Provisioning Requirements: Banks are required to set aside provisions against NPAs to cover potential
losses, as per regulatory guidelines.

4. Monitoring and Reporting: Banks regularly monitor and report NPAs to regulatory authorities and
stakeholders, ensuring transparency and accountability in their operations.

A DVANTAGES OF NPA S :

1. Identify Risks: NPAs help banks identify and mitigate risks associated with lending, allowing them to
take initiative-taking measures to minimize financial losses.

2. Improve Asset Quality: By addressing NPAs, banks can improve the quality of their loan portfolios,
which enhances their financial stability and credibility in the market.

3. Regulatory Compliance: Managing NPAs ensures compliance with regulatory requirements,

maintaining transparency and accountability in the banking sector.

4. Recovery Opportunities: Banks can implement recovery strategies to recover dues from defaulting
borrowers, potentially reducing the impact of NPAs on their financial performance.
Disadvantages of NPAs:

1. Financial Losses: NPAs lead to financial losses for banks due to the non-repayment of loans, which can
affect their profitability and capital adequacy.

2. Decreased Lending Capacity: High levels of NPAs can reduce banks' capacity to lend, limiting their
ability to support economic growth and development.

3. Reputation Risk: Persistent NPAs can damage the reputation of banks, eroding customer trust and
confidence in their services.

4. Increased Provisioning: Banks are required to make provisions for NPAs, which can reduce their
earnings and capital reserves, impacting their overall financial health.

Importance of NPAs:

1. Risk Management: NPAs play a crucial role in risk management for banks, helping them identify,
assess, and mitigate credit risks associated with lending activities.

2. Financial Stability: Effective management of NPAs contributes to the financial stability and resilience
of banks, safeguarding depositor interests and maintaining systemic stability.

3. Economic Development: By addressing NPAs, banks can allocate resources more efficiently,
supporting economic growth and development through increased lending to productive sectors.

4. Regulatory Compliance: Compliance with NPA norms ensures that banks operate within the regulatory
framework, promoting financial discipline and stability in the banking sector.

These points highlight the significance of NPAs in the banking sector and underscore the need for
proactive management to mitigate associated risks and maximize benefits.

TYPES OF NPA:
• Gross NPA
• Net NPA

G ROSS NPA:

Gross NPAs are the sum 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 sub-standard, doubtful, and loss assets.
I T CAN BE CALCULATED WITH THE HELP OF FOLLOWING RATIO :

Gross NPA= Gross NPA / Gross Advance

`Net NPA:
Net NPAs are those types 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 loans is very time consuming, the provisions the banks
must 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 the following.

Net NPAs = Gross NPAs – Provisions / Gross Advances – Provisions

• REASONS FOR AN ACCOUNT BECOMING NPA:

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.

• INTERNAL FACTORS EXTERNAL FACTORS

• Defective Lending process Ineffective recovery tribunal
• Inappropriate technology Willful Defaults
• Improper SWOT analysis Natural calamities
• Poor credit appraisal system Industrial sickness
• Managerial deficiencies Lack of demand
• Absence of regular industrial visit Change on Govt. policies
• Re loaning process

I MPACT OF NPA ON BANKS

NPAs (Non-Performing Assets) have a detrimental impact on banks. They not only absorb a
portion of interest income but also erode profits. Weak banks face challenges in leveraging
interest rates in a competitive market, hindering business growth opportunities. High NPAs
affect banks' liquidity, profitability, and competitive edge, influencing credit delivery and
expansion strategies. Impact on Profitability- Eroding current profits through provisioning
requirements, resulting in reduced interest income, Requiring higher provisioning, affecting
profits and capital funds, Limiting recycling of funds and setting asset-liability mismatches,
Some banks may understate NPAs to reduce provisioning, but this only delays the process. Asset
quality is a CRITICAL parameter in assessing a bank's performance under the CAMELS
supervisory rating system of the RBI.
2.2 NPA at SBI

NPA AT SBI GROUP

From 2012 to 2017 gross NPA was 380,035.87 (in Rs. Cr.) and net NPA was 194,727.53 (in Rs. Cr.)
Percentage of Gross NPA s is on average of five year is 5.47%, Percentage of Net NPA is on average of
five year is 2.862%. Return of assets is 0.638%. Between 01.04.93 to 31.03.2001, SBI Group incurred a
total amount of Rs. 31251 Crores towards provisioning NPA. This has brought Net NPA to Rs. 32632
Crores or 6.2% of net advances. To this extent the problem is contained but at what cost? This costly remedy
is made at the sacrifice of building healthy reserves for future capital adequacy.

Vigneswaran Swamy (2013) this study on “Determinants of bank Asset Quality and profitability” has
established the private banks and foreign banks have advantages in terms of their efficiencies in better credit
management in containing NPAs, which indicates bank privatization can lead to better management of
default risk. These findings will infer that better credit risk management practices need to be taken up for
bank lending. Adequate attention should paid to those banks with low operating efficiency and low
capitalization as macroeconomic cycles also appear to playing some role in NPA management. The state-
owned banks need to important in view of the significance. It summarized that private banks (both old and
new) and foreign banks appear to manage in their NPAs efficiency.

The asset quality of banks is one of the most important indicators of their financial health. It also reflects
the efficiency of banks’ credit risk management and the recovery environment. The Indian banks have
shown very good performance as far as the financial operations are concerned. But non- performing assets
(NPA) has caused some concerns. Despite write- offs gross NPAs have continued to rise significantly. The
new accretion to NPAs has been much faster than the reduction in existing NPAs due to lower levels of up
gradation and recoveries. To improve the banks’ ability their non –performing assets (NPAs) and
restructured accounts in an effective manner and considering that almost all branches of banks have been
fully computerized, the Reserve bank of India in its monetary policy statement 2012- 13 proposed the
following measures: • To mandate banks to put in place a robust mechanism for early detection of signs of
distress, and measures, including prompt restructuring in the case of all viable accounts wherever required,
with view to presenting the economic value such accounts: and • To mandate banks to have proper system
generated- wise data on their NPA accounts, write offs, compromise settlement, recovery and restructured
accounts. Despite these concerns, it is projected that the Indian banking industry will grow through leaps
and bounds looking at the huge growth potential of Indian economy. High population base of India, rising
disposable income, etc. will drive the growth OG Indian banking industry in the long- term.
T HE STRENGTH OF SBI G ROUP IS IDENTIFIED BY THE FOLLOWING POSITIVE FEATURE :

1. It is sizeable earnings under of non-interest income substantially/totally meets its noninterest

expenses.Its obligation for provisioning requirements is within bounds. (Net NPA/Net Advances is
1.92%)
It is worthwhile to compare the aggregate figures of the 19 Nationalized banks for the year ended March
2001, as published by RBI in its Report on trends and progress of banking in India. Interest on
Recapitalization Bonds is a income earned form the Government, who had issued the Recapitalization
Bonds to the weak banks to sustain their capital adequacy under a bailout. package. The statistics above
show the other weaknesses of the nationalized banks in addition. to the heavy burden they have to bear
for servicing NPA by way of provisioning and holding cost as under:

• Their operating expenses are higher due to surplus manpower employed. Wage costs
total assets are much higher to PSBs compared to new private banks or foreign banks.

• Their earnings from sources other than interest income are meagre. This is due to
failure to develop off balance sheet business through innovative banking products.

2. IMPACT ON LIQUIDITY OF THE SBI GROUP

Though SBI Group can meet norms of Capital Adequacy, as per RBI guidelines, the fact that their net
NPA in the average is as much as 7% is a potential threat for thereby. RBI has indicated the ideal position
as Zero percent Net NPA. Even granting 3% net NPA within limits of tolerance the SBI Group are
holding an uncomfortable burden at 7.1% as at March 2001. They have not been able to build the
additional capital needed for business. Expansion through internal generations or by tapping the equity
market but have resorted to II-Tier capital in the debt market or looking to recapitalization by
Government of India.

3.IMPACT ON OUTLOOK OF BANKERS TOWARDS CREDIT DELIVERY

The fear of NPA permeates the psychology of bank managers in the SBI Group in entertaining new
projects for credit expansion. In the world of banking the concepts of business and risks are inseparable.
Business is an exercise of balancing between risk and reward. Accept justifiable risks and implement de-
risking steps. Without accepting risk, there can be no reward. The psychology of the banks today is to
insulate themselves with zero percent risk and turn lukewarm to fresh credit. This has adversely affected
credit growth compared to growth of deposits, resulting in a low C/D Ratio around 50 to 54% for the
industry.
4. I MPACT ON P RODUCTIVITY :
High level of NPAs affect the productivity of the banks by increasing the cost of funds and by reducing
the efficiency of banks employees. The cost of funds is increased because due to the nonavailability of
sufficient internal sources they must rely on external sources to fulfill their future financial requirements.
The productivity of employees is also reduced because it keeps. staff busy with the task of recovery of
overdue. Instead of devoting time for planning for development through more credit and mobilization of
resources the branch staff would primarily be engaged in preparing a large value of returns and statements
relating to substandard, doubtful and loss assets, preparing proposal for filing of suits, waiver of legal
action, compromise, write off or in preparing DICGC claim papers etc.

S INCE 2015, THE RESERVE BANK OF INDIA (RBI) AND THE G OVERNMENT OF
I NDIA HAVE IMPLEMENTED VARIOUS MEASURES TO REDUCE THE NON-PERFORMING
ASSETS (NPA) LEVELS OF P UBLIC S ECTOR B ANKS (PSB S ). T HESE INITIATIVES
INCLUDE :

1. Asset Quality Review (AQR): The RBI initiated AQR in 2015 to identify and classify NPAs
accurately, ensuring transparency in reporting.

2. Prompt Corrective Action (PCA) Framework: The RBI implemented PCA norms to monitor and
address the financial health of banks exhibiting high levels of NPAs. Under PCA, banks are subject to
certain restrictions and corrective measures to improve their performance.

3. Recapitalization: The government infused capital into PSBs to strengthen their balance sheets and
enhance their lending capacity, thereby mitigating the impact of NPAs.

4. Insolvency and Bankruptcy Code (IBC): The introduction of the IBC provided a legal framework for
the resolution of stressed assets, facilitating timely resolution and recovery of NPAs.

5. Enhanced Supervision: The RBI intensified supervision and monitoring of PSBs to ensure
compliance with prudential norms and to encourage proactive measures for NPA resolution.

6. NPA Resolution Mechanisms: Various resolution mechanisms such as restructuring, asset

reconstruction, and strategic debt restructuring were encouraged to address NPAs effectively. Overall, the
collaborative efforts of the RBI and the government aimed to improve asset quality, strengthen the
banking sector, and restore confidence in PSBs.
S INCE 2017, THE S TATE B ANK OF I NDIA (SBI) HAS IMPLEMENTED SEVERAL INITIATIVES
GUIDED BY THE R ESERVE B ANK OF I NDIA (RBI) TO REDUCE ITS N ON -P ERFORMING A SSETS
(NPA S ). S OME OF THESE MEASURES INCLUDE :

1. Strengthened Credit Appraisal Process: SBI has enhanced its credit appraisal process to ensure
rigorous evaluation of loan applications, including comprehensive assessment of borrowers'
creditworthiness and risk factors.

2. Tightened Monitoring and Supervision: SBI has intensified monitoring and supervision of loan
accounts, including regular reviews and early identification of potential stress factors to prevent asset
deterioration.

3. Enhanced Recovery and Resolution Mechanisms: SBI has adopted proactive measures for NPA
recovery, including robust recovery strategies, asset reconstruction, and participation in resolution
mechanisms such as the Insolvency and Bankruptcy Code (IBC).

4. Restructuring and Resolution Frameworks: SBI has implemented restructuring frameworks to

provide relief to viable stressed accounts, while also focusing on prompt resolution of non-viable
accounts through timely recognition and provisioning.

5. Focus on Risk Management: SBI has strengthened its risk management framework, including
measures to identify, measure, monitor, and mitigate credit risk associated with NPAs, thereby enhancing
overall asset quality and resilience.

6. Compliance with Regulatory Guidelines: SBI ensures strict adherence to regulatory guidelines and
directives issued by the RBI regarding NPA classification, provisioning norms, and disclosure
requirements, fostering transparency and accountability.

Through these initiatives, SBI remains committed to prudently managing its asset quality, minimizing
NPA levels, and maintaining the trust and confidence of its stakeholders.
Outcomes of Implementing Initiatives

A SSET Q UALITY
The focus on asset quality and containing risk has been an area of continued attention for the Bank. There
was a broad-based improvement in the asset quality of your Bank in FY2023. The gross non-
performing assets (NPA) of the Bank dropped by 119 bps YoY and stood at 2.78% as of March
2023. The net NPA ratio accordingly stands at 0.67% as of March 2023 down 35 bps YoY.
Slippage, which indicates the incremental fall in credit quality during the year, was down by 26.38%
compared to FY2022 and as a result, the slippage ratio for FY2023 improved by 34 bps YoY reaching
0.65% as of March 2023. The proactive management of risk during the year resulted in an improvement
in Provision Coverage Ratio (PCR) by 135 bps YoY, standing at 76.39% by the close of financial year.

B ANKING
Credit growth continued to see double digit growth and has become broad based across sectors. In
FY2023, ASCB’s bank credit grew by `17.8 Lakh Crore (15.0% YoY) to `136.75 Lakh Crore, as against
`10.4 Lakh Crore (9.6% YoY) in FY2022. Aggregate deposits of ASCB grew by `15.7 Lakh Crore (9.6%
YoY) to `180.43 Lakh Crore compared to last year’s growth of `13.5 Lakh Crore (8.9% YoY). During the
reporting period, RBI increased the policy repo rate by 250bps in 6 tranches and banks have also
transmitted it to both deposit and credit rates. The asset quality of ASCBs improved during 2022-23, with
gross NPA ratio declining to 4.5% in December 2022, compared to 5.8% in March 2022, primarily due to
the quality improvement across all the major sectors. With digital payments, India has been witnessing
new milestones on the back of the robustness of our payment ecosystem and acceptance by a wide
stratum of consumers. Among all, UPI has emerged as the most popular and preferred payment mode in
India accounting for ~75% of the total digital payments.

P ERSONAL B ANKING
H OME L OANS
The residential real estate market witnessed a sustained increase in housing sales and new launches,
driven in part by robust demand from consumers in metro, Tier-II, and III cities. Consumers' enthusiasm
to invest in real estate has fueled this positive trend. The Home Loan portfolio constituted 23.08% of total
Domestic advances and 36.03% of NBG advances, while Priority Sector Lending accounted for 31.62%
of the total portfolio. Proactive monitoring and soft contact with customers enabled the bank to maintain
NPA in Home Loans at a low level (only 0.69% as of 31st March 2023). The bank has surpassed industry
growth, securing an overall industry-wide market share of 21.77% as of 30th September 2022, and
33.09% among All Scheduled Commercial Banks (ASCB) as of 31st March 2023. The bank was the sole
commercial bank nominated as the Central Nodal Agency (CNA) by the Ministry of Housing and Urban
Affairs (MOHUA). Serving as CNA for the PMAY-CLSS scheme, the bank processed 12,204 subsidy
claims amounting to Rs. 255 Crore in FY2023. Furthermore, to expand outreach to the underserved
population, the bank signed an MOU with 5 housing finance companies for co-lending.
compared to over 900 in the USA and 200+ in China. The Bank emerges as a leading player in new car
loans, leveraging a range of initiatives and services.
Performance
The Bank attained a remarkable year-on-year (YoY) growth of 23.2% in auto loans, amounting to
₹18,375 Crore in FY2023, securing an impressive market share of 19.40%. Notably, the high-value car
loan segment, with loan amounts exceeding ₹25 Lakh, witnessed an outstanding YoY growth of 160%. In
FY2023, the Bank disbursed a total of ₹43,954 Crore in auto loans. Through constant proactive
monitoring, follow-up, and best-in-class underwriting practices, the Bank achieved a commendable Non-
Performing Asset (NPA) ratio of 0.43% in FY2023, a significant improvement from 0.69% in the
previous year. This performance underscores the Bank's commitment to maintaining exemplary standards
in the industry.

E NHANCED T RANSPARENCY AND D ISCLOSURE :

RBI initiatives may promote greater transparency and disclosure requirements related to NPAs,
ensuring that banks accurately report and disclose information on their NPA levels and
provisioning practices.

I MPROVED R EGULATORY C OMPLIANCE :

Banks may enhance their compliance with regulatory guidelines and norms related to NPAs,
ensuring adherence to prudential norms set by the RBI for asset classification, provisioning, and
resolution processes.

I NCREASED F OCUS ON R ESOLUTION M ECHANISMS :

RBI initiatives may encourage banks to adopt proactive measures for NPA resolution, including
restructuring, asset reconstruction, and recovery efforts, to minimize losses and maximize asset
value.

E NHANCED F INANCIAL H EALTH OF B ANKS :

By addressing NPAs effectively, banks may experience improved financial health, with stronger
balance sheets, higher profitability, and enhanced capital adequacy, thereby fostering confidence
among depositors and investors.

S TIMULATED C REDIT G ROWTH :

Successful NPA resolution initiatives may stimulate credit growth by freeing up capital tied up in
non-performing assets, allowing banks to allocate resources more efficiently towards productive
lending activities.
Chapter 03. Presentation And Analysis of Data
(The analysis is based on the Annual Reports of the SBI)

A non-performing asset has been made on study of loans and NPA‟s towards state bank of India. Analysis by
collecting data from the bank. The data has been collected by way of secondary data through the bank while
preparing the secondary data was taken to see that questions were being framed relevant to the objectives of the
study, secondary data were designed to evaluate the loans and NPA‟s towards State bank of India were drawn to
arrive at a conclusion.

Data analysis has multiple facts of agricultural loans and allied activities, loans and NPA‟s for industry sectors,
loans. And NPA‟s for service sector, loans and NPA;s for personal sector. To suggest the ways and means to reduce
the NPA.

3.1 Asset Quality Review (AQR)

( Rs. in Crore)

Year Total Asset

FY2013 15662.61
FY2014 17922.35
FY2015 20480.80
FY2016 22590.63
FY2017 27059.67
FY2018 38499.79
FY2019 39512.25
FY2020 44004.06
FY2021 47757.94
FY2022 53125.45
FY2023 55169.79

AQR
60000.00
50000.00
40000.00
30000.00
20000.00
10000.00
0.00
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

INTERPRETATION - The objective of this analysis is to know the position of SBI in terms of total Assets. From the period
from 2013 to 2023. A firm’s total assets include all current and fixed assets. The above graph shows that total assets of SBI
increased in 2014 by 2259.74 billion, in 2023 increased by 39507.19 billion. So, the assets of the SBI bank increased in the last
ten years.

Source: Data collected from secondary data Annual Report

3.2 Capital Adequacy Ratio

This study collected data to know about the NPA relating to agricultural loans and allied
activities are shown in 3.2 table.
(Rs. in crore)

Year Capital Adequacy

FY2013 12.92%
FY2014 12.96%
FY2015 12.00%
FY2016 13.12%
FY2017 13.11%
FY2018 13.18%
FY2019 13.09%
FY2020 13.06%
FY2021 13.74%
FY2022 13.83%
FY2023 14.68%

Capital Adequacy Ratio

16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Source: Data collected from secondary data Annual Report

INTERPRETATION

Each bank needs to create a capital reserve to compensate for the non- performing assets. Here, SBI has shown a
better capital adequacy ratio with 14.68% in 2023 as compared to 13.09% in 2019, 12.92% in 2013. The capital
adequacy ratio is important for them to maintain as per the regulation. Each bank needs to create a capital reserve to
compensate for the non- performing assets.
3.3 Comparison of Agricultural and allied Activities loan and NPA Amount of
NPA on Loans (In Crores)
(Rs. in crore)

Year Loans for agricultural and allied NPA Amount

activities
FY2013 70,874 26,704.56
FY2014 74,970 30,704.29
FY2015 86,193 10,216.74
FY2016 102,423 9,839.11
FY2017 1,25,270 7,354.64
FY2018 1,66,819 20,964.77
FY2019 1,56,385 23,335.83
FY2020 1,77,473 32,558.27
FY2021 1,98,268 32,392.47
FY2022 2,19,396 30,281.87
FY2023 2,54,617 29,587.72

Comparision of Agricultural Loan and NPA

$300,000.00

$250,000.00

$200,000.00

$150,000.00

$100,000.00

$50,000.00

$0.00
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

NPA Loans for agricultural and allied activities

Source: Data collected from secondary data Annual Report

INTERPRETATION

From the above figure 3.3 the Amount of NPA to Agricultural loans has marginally decreased in 2014-
2015 and thereafter it has witnessed decline a sharp. These indicate increased deficiency on part of bank
on recovery of loans. In This study to understand about the loans for industry sector and represents the
NPA‟s relating to industry sector and comparison of loans and NPA‟s in industry sector.
3.4 Comparison of Loans for industry sector and NPA
This study collected data about the loans and its NPAs in industrial sector are shown in 3.4 table.
(Rs. in crore)

YEAR Loans for Industry Sector NPA for Industry Sector

FY2013 31,346.93 12,309.02
FY2014 33,156.78 19,995.56
FY2015 65,699.72 7,087.13
FY2016 91,144.42 11,602.30
FY2017 78,050.67 11,536.03
FY2018 99,386.61 16,020.84
FY2019 97,116.64 12,545.61
FY2020 101,080.54 18,738.88
FY2021 92,993.76 11,206.95
FY2022 128,015.22 10,832.34
FY2023 108,965.94 5,550.08

Comparison of Loan for Industry Sector and NPA

140,000.00

120,000.00

100,000.00

80,000.00

60,000.00

40,000.00

20,000.00

0.00
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Loans for Industry Sector NPA for Industry Sector

Source: Data collected from secondary data Annual Report

From the above table 3.4 the NPA relating to industrial loans by the bank was stood atRs1209.02
crores in 2013-2014 which has considerably raised to Rs 5550.08crores in the year 2022-2023.But
it has drastically declined to Rs123.58crores in 2015-2016 there after it has slightly increased.
From the above figure 3.4 the NPA relating to industrial loan has marginally increased in the year
2013-2014 compared to 2022-2023. This has drastically declined in the subsequent ten years.
3.5 Comparison of Loans for Service Sector and NPA

This study collected data about the loans and its NPAs in industrial sector are shown in 3.5 table.
(Rs. in crore)

YEAR Loans for Service Sector NPA for Service Sector

FY2013 14,317.87 1,535.96
FY2014 18,490.54 1,828.64
FY2015 26,146.41 1,699.94
FY2016 32,341.80 1,747.36
FY2017 53,723.75 2,378.55
FY2018 74,363.81 7,339.66
FY2019 99,232.43 9,674.48
FY2020 83,870.61 5,289.20
FY2021 122,088.06 10,198.53
FY2022 153,385.75 9,989.11
FY2023 161,450.44 4,045.64

Comparison of Loan for Service Sector and NPA

200,000.00

150,000.00

100,000.00

50,000.00

0.00
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Loans for Service Sector NPA for Service Sector

Source: Data collected from secondary data Annual Report

From the above table 3.5 the amount of NPA on service sector loan has witnessed a decline in tends year
after year from 2014-15 to 2015-16 which was a good sign. But after 2017-18 there’s a rise of NPA has
been seen which has been decline in 2023. From the above figure 3.5 the percentage Service Sector loan
has witnessed an increased in year after year from 2013-2015 which is a good sign as the NPA for loan
has been seen declined by the years.
 3.6 Comparison of Personal Loans and NPA

This study collected the data to know about the comparison of loans and NPA‟s for personal loans are
shown in 3.6 table.
(Rs. in crore)

YEAR Personal Loan NPA for Personal Loan

FY2013 74,501 5,540.4
FY2014 47,617 6,265.9
FY2015 56,548 1,202.51
FY2016 70,699 1,033.79
FY2017 89,889 972.64
FY2018 104,508 3,332.33
FY2019 125,965 9,674.48
FY2020 166,528 5,289.20
FY2021 222,966 2,352.84
FY2022 285,987 2,158.71
FY2023 349,988 2,188.53

Comparison of Personal Loan and NPA

400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Personal Loan NPA for Personal Loan

From the above table 3.6 the Loan amount of NPA on personal loans which was at Rs 74501 crores in
2013 had considerably increased to Rs 349988 crs in 2023. From the above figure 3.6 the NPA on
personal loans in terms of percentage has initially witnessed a marginal declined.

Source: Data collected from secondary data Annual Report

RATIO ANALYSIS:
The relationship between two related items of finance is known as ratio. A ratio is just one number
expressed in terms of another. The ratio is customarily expressed in their different ways. It may be
expressed as a proportion between the two figures. Second, it may be expressed in terms of percentage.
Third, it may be expressed in terms of rate.
In an annual report, "Net Advances" typically refers to the total amount of loans or credit extended by a
financial institution to its customers during a specific period, minus any repayments or write-offs. It's a
key metric that indicates the growth and performance of the institution's lending activities. Higher net
advances suggest increased lending and potential revenue generation.
In an annual report, "gross advances" summarize the total loans and advances a financial institution has
provided during the year. It's a key indicator of the institution's lending activity, reflecting its growth and
profitability. However, it's important to assess the quality of these advances, considering factors like
credit risk and regulatory compliance.
The use of ratio has become increasingly popular during the last few years only. Originally, the bankers
used the current ratio to judge the capacity of borrowings business enterprises to repay the loan and make
regular interest payments. Today it has assumed to be important tools that anybody connected with the
business turns to ratio for measuring the financial strength and earning capacity of business.

3.7 Gross NPA Ratio

Gross NPA Ratio is the ratio of gross advances of the Bank. Gross is the sum of all loan assets that are
classified as NPA as per RBI guidelines, the ratio is to be counted in terms of percentage and the formula
for GNPA is as follows:

Gross NPAs Ratio = Gross NPAs *100/Gross Advances

(Rs. in crore)

GROSS
GROSS NPA ADVANCES GROSS NPA
YEAR (IN CRORE) (IN CRORE) (IN RATIO)

FY2013 51189.39 1078557 4.75

FY2014 61,605.35 1245122 4.95
FY2015 56725.34 1335424 4.25
FY2016 98172.80 1509500 6.50
FY2017 112342.99 1627273 6.90
FY2018 2,23,427 1763829 10.91
FY2019 1,72,750 1092283 7.53%
 FY2020 1,49,092 4092421 6.15%
FY2021 1,26,389 3,15,554 4.98%
FY2022 1,12,023 3,46,209 3.97%
FY2023 90,928 4,01,754 2.78%

Gross NPA & Gross Advance

4500000.00
4000000.00
3500000.00
3000000.00
2500000.00
2000000.00
1500000.00
1000000.00
500000.00
0.00
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

GROSS ADVANCES (IN CRORE) GROSS GROSS NPA (IN CRORE)

GROSS NPA (IN RATIO)

12

10

0
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

The above table and graph make it very clear that the average Gross NPA of SBI is excellent. It has seemed
that the gross NPA which was 4.75% in 2013 increased every year and finally reached 2.78% in 2023. It
seems that SBI has taken more care and followed ideal norms of granting advances, so that the recovery is
leading to lower gross NPA. However, despite this positive trend, there has been observed a simultaneous
increase in the bank's Gross Advances, reflecting its continued lending activities. This scenario suggests that
while the bank is successfully addressing non-performing loans, it is also expanding its loan book, potentially
indicating growth and increased market presence.
3.8 NET NPA RATIO

The net NPA percentage is the ratio of NPA to net advances in which is to be deducted from the
gross advances. The provision is to be made for NPA account. The formula for that is –
Net NPA Ratio = Net NPAs *100 / Net Advances

(Rs. in crore)
YEAR NET NPA NET ADVANCES NET NPA RATIO

FY2013 21956 1045546 2.10

FY2014 21956 1209963 2.57
FY2015 27590 1300026 2.12
FY2016 55807 1463700 3.18
FY2017 58277 1571078 3.71
FY2018 110855 1934880 5.73
FY2019 65895 2185877 3.01
FY2020 51871 2325290 2.23
FY2021 36810 2449498 1.50
FY2022 27966 2733967 1.02
FY2023 21467 3199269 0.67

Net NPA & Net Advance NET NPA RATIO

7
3500000
3000000 6
2500000 5
2000000
4
1500000
1000000 3
500000 2
0
1
0

NET NPA NET ADVANCES

It’s observed that SBI bank has reduced its Net Non-Performing Assets (NPAs) by a certain factor, indicating
improved asset quality and potentially better risk management practices. However, there's also a noticeable
increase in the bank's Net Advances, which could suggest a higher volume of loans and advances extended by
the bank. This juxtaposition warrants further analysis to understand the implications on the bank's overall
financial health and risk profile.
3.9 Provisional Ratio
The provisional ratio in NPAs represents an initial assessment of non-performing assets based on
preliminary data, aiding in early risk evaluation and management before final analysis. It serves as
an interim measure until more accurate information is available for comprehensive NPA
assessment.

(Rs. in crore)

YEAR Total Provision (In cr.) GROSS NPA (IN Cr.) Total Provision Ratio

FY2013 16977 51189.39 33%

FY2014 21218 61,605.35 34%
FY2015 25811 56725.34 46%
FY2016 33307 1509500 2%
FY2017 40363 1627273 2%
FY2018 22798 1763829 1%
FY2019 245234 1092283 22%
FY2020 57624 4092421 1%
FY2021 51144 315554 16%
FY2022 36198 346209 10%
FY2023 33481 4,01,754 8%

Provisional Ratio
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Total Provision (In cr.) GROSS NPA (IN Cr.)

INTERPRETATION

This ratio indicates the degree of safety measures adopted by the banks. It has a direct bearing on the
profitability, dividend and safety of shareholders’ fund, if the provision ratio is less, it indicates that the
banks have made under provision. The highest provisions ratio is showed by SBI is 46% in 2015 as
compared to 8% in 2023, 1% in 2020.
Chapter 04

4.1 Conclusion

I N CONCLUSION , THE NPA REPORT OF SBI B ANK UNDERSCORES SEVERAL IMPORTANT POINTS .
F IRSTLY , THE BANK HAS DEMONSTRATED COMMENDABLE PROGRESS IN REDUCING ITS G ROSS N ON -
P ERFORMING A SSETS , SHOWCASING ITS ABILITY TO MANAGE CREDIT RISK EFFECTIVELY AND
ENHANCE ASSET QUALITY . T HIS REDUCTION SIGNALS IMPROVED FINANCIAL HEALTH AND INVESTOR
CONFIDENCE IN THE BANK ' S OPERATIONS . A DDITIONALLY , THE REPORT HIGHLIGHTS THE BANK ' S
CONTINUED FOCUS ON LOAN RECOVERY EFFORTS AND PRUDENT LENDING PRACTICES , CONTRIBUTING
TO OVERALL STABILITY AND RESILIENCE IN THE FACE OF ECONOMIC UNCERTAINTIES .

F URTHERMORE , WHILE THE DECREASE IN NPA S IS A POSITIVE DEVELOPMENT , THE SIMULTANEOUS

INCREASE IN G ROSS A DVANCES WARRANTS CAREFUL MONITORING . T HE EXPANSION OF THE LOAN
PORTFOLIO SUGGESTS ROBUST LENDING ACTIVITIES AIMED AT STIMULATING ECONOMIC GROWTH AND
MEETING CUSTOMER DEMAND . H OWEVER , IT ALSO NECESSITATES A RIGOROUS ASSESSMENT OF
CREDIT QUALITY AND RISK MANAGEMENT PRACTICES TO PREVENT POTENTIAL FUTURE ASSET
QUALITY DETERIORATION .

I N CONCLUSION , SBI B ANK ' S NPA REPORT EXEMPLIFIES ITS PROACTIVE APPROACH TO ADDRESSING
CHALLENGES IN THE BANKING SECTOR WHILE CAPITALIZING ON GROWTH OPPORTUNITIES . M OVING
FORWARD , SUSTAINED EFFORTS IN MAINTAINING ASSET QUALITY , FOSTERING PRUDENT LENDING
PRACTICES , AND ADAPTING TO EVOLVING MARKET DYNAMICS WILL BE CRUCIAL FOR THE BANK ' S
CONTINUED SUCCESS AND LONG - TERM SUSTAINABILITY .

4.2 R ECOMMENDATION

To improve their NPA situation, SBI Bank could:

1. Enhance credit risk assessment.

2. Implement early warning systems.
3. Strengthen monitoring and recovery strategies.
4. Diversify loan portfolio.
5. Ensure compliance and governance.
6. Invest in staff training and skill development.
BIBLIOGRAPHY

MAGAZINES

• Investors
• Business India

E- NEWSPAPER

• The Economic Times

• The Business Standard

• PUBLISHED MATERIAL

• RBI Guidelines Circulars on Income Recognition and Asset Classification

• Report on Trend and progress of Banking in India 2013- 2023

WEBSITES
www.rbi.org.in
www.google.co.in
www.wiki.answers.com
www.yahoofinance.com
www.moneycontrol.com
www.sbi.com