Study on NPAs Using Financial Ratios (With Special Reference to SBI)

Volume : VII, Issue : VII, July - 2018

Dr. Jeelanbasha. V

NPA can be said to be a double–edged weapon. On the one hand, it does not generate any income for the bank, and on the other

hand, the banks are required to make provisions for such NPAs out of the current profits. Due to the advances getting blocked, the

credibility of the bank decreases, not only by the amount of NPA, but also due to the opportunity cost of profit forgone by doing

some investment in other return earning project or asset. Apart from internal and external complexities, increase in NPAs directly

affects the profitability, solvency and sometimes even the existence of the banks.

Objectives of the Study are to study the status of non–performing asset using financial ratios in SBI group. and suggest and

conclude based on findings. An explorative and descriptive study is adopted to achieve the objectives of the study. Both primary

and secondary data are used. Primary data is used through clarification from concerned officials. Majority of the data for the study

is collected from the secondary source. This covers annual period of five years from 2012–2013 to 2016–2017. The data is suitably

tabulated, graphically presented, statistically interpreted to draw the findings. Financial ratios and statistical tools like average,

standard deviation, coefficient of variation and compound annual growth rate are used to analyze NPAs extensively. It is

concluded that Non– Performing Assets have not only problem for banks and also problem for the economy. The money locked

up in NPAs has a direct impact on profitability of the banks. Bank should ensure that the NPAs should not be further slipped and

written off .It has to strategically plan for proper appraisal of credit application, stringent monitoring of potential NPAs

strengthening of further recovery mechanism etc. keeping in view, the aggressive nature of making huge profits the bank should

not overlook its liquidity position . Further, emerging of NPAs should be effectively tackled. New innovative steps have to be taken

up to reduce NPAs and also to increase the depositors‘ safety money as well as shareholders. The government needs to reduce the

mandatory lending to priority sector as it is one of the major contributors to bank‘s NPAs.