1 NON-PERFORMING ASSETS OF BANKS IN INDIA- 2 ISSUES …apjor.com/ijrp/downloads/270420173.pdf ·...

International Journal of World Research, Vol: I Issue XXXV, April 2017, Print ISSN: 2347-937X

www.apjor.com Impact Factor ( GIF) 5.42 Page 12

1 NON-PERFORMING ASSETS OF BANKS IN INDIA- 2

ISSUES AND CHALLENGES

Dr. M.RAJESH1

HOD, Department of Corporate Secretaryship, D.B. Jain College, Thoraipakam,

Chennai , Tamil Nadu- 600 097

Dr. T. SIVAKUMAR2

Assistant Professor, Department of Commerce, D.B. Jain College, Thoraipakam,

Chennai , Tamil Nadu-600 097

ABSTRACT

Banking sectors in India plays a vital role in the in the development of the country’s economy. It shows their ability in terms

of mobilization and allocation of resources in a best ways. The sound financial position of a bank is the guarantee not only to its

depositors but equally important for the whole economy of the nation. Today the Indian banking system is among the best in the world

because Indian banks are favorable on growth, asset quality and profitability; RBI and Government have made some notable changes

in policies and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the

payments system and integrating regulations of commercial banks. In terms of quality of assets and capital adequacy, these banks

have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The best indicator

for the health of the banking industry in a country is its level of Non-performing assets (NPAs). Reduced NPAs generally gives the

impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of

provisions, which bring down the overall profitability of banks. The Indian banking sector is facing a serious problem of NPA. The

magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need

to be reduced and controlled.

Key Words: Non-Performing Assets, Banking Industry, BASEL I, BASEL II, Public Sector Banks, Scheduled Commercial Banks,

Foreign Banks.



INTRODUCTION

Since Nationalization, banks have been perceived as instruments of socio-economic development. Their performance was

measured not in terms of profitability and efficiency of service, but in terms of quantum of credit delivered, especially to priority

sector and the number of branches opened. Banking is the key sector of any economy. Its energy and vitality indicate the health and

prosperity of any nation. In the liberalizing economy, banking and financial sector reforms assume high priority. The new economic

reforms have given a new thrust to the banking sector as a whole and private sector in particular. The accounting practices followed by

Public Sector Banks over the years in India have allowed them to book the interest due. But not realized as income. Lack of explicit

provisioning norms allowed banks to make insufficient provision for NPAs. These practices had permitted banks to defer corrective

measures on their bad loans for a long period. In this back drop, the study on an analysis of non-performing assets of public sector

banks will bring into focus its impact and the present status of banks with regard to NPA.

BANKING INDUSTRY – AN OVERVIEW

On the recommendations of the All India Rural Credit Survey committee, a leading commercial bank was to be taken over.

The main purpose of this taking over of the commercial bank was to provide adequate funds for agriculture and rural industries. In

May 1955 Imperial Bank of India was nationalized and State Bank India came into existence. Thus, the first commercial bank

Nationalized in India was State Bank of India, along with seven other subsidiary banks also were set up and they are called SBI group

of banks. Till 1966, the majority of commercial banks in India were only with the private sector and Government could not effectively

control them. There were serious arguments for the nationalization of commercial banks.

However, on 19th

July 1969, 14 major scheduled banks in the country were nationalized. The ordinance for the taking over of

these banks was questioned by the private sector bank. The Supreme Court struck down the ordinance by finding defects in the

compensation decided by the Government. In 1970, a comprehensive Act was passed called Banking companies Act. By this the

taking over of major schedules banks became absolute. Another six more banks were nationalized in 1980. The total number of public

sector banks was 28. But, at present the total number stands at 27 with the merger of New Bank of India with Punjab National Bank.

Even the Bank of Tanjavur Ltd., which was in the private sector, has been merged with Indian Bank.

Recent years the Indian financial sectors made tremendous changes in terms of provide financial assistance to the primary

sectors, industries and other sectors. Particularly banking industry services are essential to develop country‟s economy and also overall

growth of the nation.

The reform process mitigated in 1991 poses challenge before bankers as never before. Bankers who worked with Public

Sector Banks during 1970-90 had their tasks defined for them. The government - the owner - decided on the agenda for action,

directing the flow of credit and even determining the percentage of credit flows to specific sectors. Over a period of time, the

prevailing environment created a mindset where one began to look for guidance even in matters where it was not necessary. There was

comfort when approval, guidance or confirmation of action taken was received from higher authorities. To deal with the emerging

situation bankers have to shed a lot of old ideas, change practices and adopt a distinct approach to meet the challenges ahead.

The process of reform and deregulation has, over a period of time, gathered considerable speed. The Reserve Bank of India

(RBI) is making all efforts to ensure that the financial services industry achieves standards comparable to the internationally accepted

ones and is even offering specific suggestions on how to achieve these.

The Public Sector Banks (PSBs) viability will depend on the profit generating capacities of its operations. However, the

reform process has forced banks to strengthen this balance sheet and also to try and reach accepted international standards for sound

sustainable units. The implementation of prudential norms in Indian banking system on the basis of the recommendations of the

Narasimham Committee has constituted a significant step towards introduction of transparency in accounting practices and bringing

the norms to internationally accepted standards. After, the implementation of prudential norms, the Indian banking sector is facing a

serious situation, in view of the mounting NPAs. The earning capacity and profitability of many banks, has been adversely affected by

the high level of NPAs. Thus reduction of NPAs is posing the biggest challenges to banks in Indian economy. NPAs in banks affect

their liquidity, profitability and equity.

However, a major area of concern facing the banks today is the growing level of non-performing assets, following the

prescription of prudential accounting norm for asset classification. Income recognition and provisioning, banks have classified their

advances as 'Standard', 'Sub standard', 'Doubtful' and 'Loss'. Other than standard assets, the rest are treated as "Non-Performing

Assets" (NPAs) and no interest should be charged to or taken into account from these assets.

NON-PERFORMING ASSETS

Non-Performing Assets (NPAs) are one of the problem areas which require attention for improvement in the management of

public sector banks (PSBs) and their profitability. Although bank assets include premises, furniture, fixtures, leased assets,

investments, advances and others, the term non-performing asset is popularly referred to as non-performing advances.

An advance is given with the expectation that it will perform its duty of revenue earning through the generation of interest. Also the

return of the original sum must be ensured. If any advance fails to perform any of these two functions, it is termed as Non-performing

advance. NPAs not only affect the recovery of advances leading to capital erosion of banks. They have their own implications to the

banking and other sectors of the economy and to society as a whole.

Performance in terms of profitability is a benchmark for any business enterprise including the banking industry. However,

increasing NPAs have a direct impact on banks profitability as, legally banks are not allowed to book income on such accounts and at



the same time they are required to make provision for such advances as per the RBI guidelines. Also with increasing deposits made by

the public in banks, the banking industry cannot afford to allow defaults by borrowers since NPAs also affect their repayment

capacity.

CLASSIFICATION OF NPAs

Non-Performing Assets can be classified into three broad catagories like Sub Standard Assets, Doubtful Assets and

Loss Assets. The following chart explained that classification of Non-Performing Assets.

Chart 1

PROVISIONING REQUIREMENTS FOR NPAS UNDER DIFFERENT CATEGORIES

The following table gives information regarding the provision required to create NPAs for various assets.

Table 1

Provisioning Requirements for NPAs under Different Categories

PARTICULARS CATEGORY PROVISION

(a) Substandard Assets

(b) Substandard Assets

(c) Doubtful Assets

(i) NPA up to 3-5 years

(ii) NPA up to 3-5 years

(iii) NPA beyond 5 years

(d) Loss Assets

Nil

10% of Advance (i.e., gross amount)

Deficit + 20% of Security



100% of Advance

MEASUREMENT OF NPAS

NPAs are measured in two categories: which are Gross NPA and Net NPA.

Gross NPA Gross NPAs is equal to the sum total 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 as sub-standard,

doubtful, and loss assets. Gross NPA Ratio is calculated; Gross NPAs divided by Gross Advances

Net NPA Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs. Net NPA shows the actual

burden of banks. Bank balance sheets contain a huge amount of NPAs and the process of recovery and write off of loans is very time

consuming, the provisions the banks have to 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. Net NPA Ratio= (Gross NPAs – Provisions) / (Gross Advances –

Provisions).

NON PERFORMING ASSETS AS A MAJOR ISSUE AND CHALLENGE FOR BANKING INDUSTRY

Non-performing Assets are threatening the stability and demolishing bank„s profitability through a loss of interest income,

write-off of the principal loan amount itself. RBI issued guidelines in 1993 based on recommendations of the Narasimham Committee

that mandated identification and reduction of NPAs be treated as a national priority because the level of NPA act as an indicator

showing the bankers credit risks and efficiency of allocation of resource. The financial reforms in Indian bank industry have helped

largely to clean NPA which was around Rs. 52,000 crores in the year 2014. The earning capacity and profitability of the bank are

highly affected due to this NPA.

STANDARD ASSETS

ADVANCES

NON-PERFORMING ASSETS

SUB STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS



BASEL I Norms:

The history of the Basel International codes and Standards (BIS) relating to minimum capital adequacy for banks goes back

to the developed countries' initiative in 1988 to protect the Organization for Economic Cooperation and Development (OECD) banks

from the financial crises common during the 1980s. Basel I norms, were set out in 1988 and accepted over the years by around 100

Central Banks across the globe under what came to be known as the Basel Accord. The original accord, now known as Basel-I, was

quite simple and adopted a straight-forward `one size fits all approach' that does not distinguish between the differing risk profiles and

risk management standards across banks. The Indian monetary authorities implemented the Basel II by 1999 [3]. The banks were to

assess their assets and off-balance-sheet risks taken and incorporate them on their balance-sheet. Basel I norms prescribed a minimum

capital adequacy ratio (CRAR) [1] of 8 % for Banks which were signatories to the Basel Accord. Basel I framework was confined to

the prescription of only minimum capital requirements for banks, the Basel II framework expands this approach not only to capture

certain additional risks in the minimum capital ratio but also includes two additional areas, Supervisory Review Process and Market

Discipline through increased disclosure(4)

. Thus emerged RBI guidelines on investments and operations risk, paving the way for

adoption of what have come to be known as Basel II norms.

BASEL II Norms:

It is the second accord which focuses on operational risk along with market risk and credit risk. Basel II tries to ensure that

the anomalies existed in Basel I are corrected. The process of implementing Basel II norms in India is being carried out in phases.

Phase I has been carried out for foreign banks operating in India and Indian banks having operational presence outside India with

effect from March 2008. In phase II, all other scheduled commercial banks (except Local Area Banks and RRBs) will have to adhere

to Basel II guidelines by March 31, 2009. With the deadline of March 31, 2009 for full implementation of Basel II norms fast

approaching, banks are looking to maintain a cushion in their respective capital reserves. The minimum capital to risk-weighted asset

ratio (CRAR) in India is placed at 9%, one percentage point above the Basel II requirement. All the banks have their Capital to Risk

Weighted Assets Ratio (CRAR) above the stipulated requirement of Basel guidelines (8%) and RBI guidelines (9%). As per Basel II

norms, Indian banks should maintain tier I capital of at least 6%. The Government of India has emphasized that public sector banks

should maintain CRAR of 12%. For this, it announced measures to re-capitalize most of the public sector banks, as these banks cannot

dilute stake further, as the Government is required to maintain a stake of minimum 51% in these banks.

COMMUTE REPORT ON NPAs

In times of intensified international competition, the second reforms Narasimham committee report on banking sector revolve

round the three inter-related issues.

i. Actions that need to be taken to strengthen the foundation of the banking system.

ii. Related to this, streamlining the procedures, upgrading the technology and human resource development.

iii. Structural changes-in the system.

PROBLEMS DUE TO NPAS The major problems arising due to NPAs are namely:

1. Depositors do not receive a market return on savings;

2. Banks redistribute losses to other borrowers/depositors by charging higher interest rates/lower deposit rates, which re-

strain saving and financial market and obstruct economic growth;

3. Non-performing loans represent bad investment. They misallocate credit from good projects, which do not receive

funding, to failed projects.

4. Interest income cannot be booked on the loan declared as an NPA, and so profits get affected. Further, provisioning

against assets creates more losses. The borrower is given more loans to pay interest on past loans.

A bank with say 30% NPA, will have to earn on 70% of its assets to meet its expenses and make a profit. It will have a

tendency to go for more risky ventures.

IMPACT OF NPAS 1. NPA not only affects current profit but also future stream of profit, which may lead to loss of some long-term beneficial

opportunity. Another impact of reduction in profitability is low ROI, which adversely affect current earning of bank.

2. Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to borrowing money for shortest

period of time which lead to additional cost to the company.

3. Time and efforts of management is another indirect cost which bank has to bear due to NPA.

4. Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit. It will lose its goodwill

and brand image and credit which have negative impact to the people who are putting their money in the banks.

5. The increase in non-performing loans tends to follow by decease in estimated cost efficiency. A possible explanation for this

relationship is that non-performing loans are more costly for banks to service then the other loans.



PREVENTIVE MEASURES FOR NPA 1. Identifying borrowers with genuine intent from those who are non- serious with no commitment or stake in revival is a

challenge confronting bankers.

2. Longer the delay in response, greater the injury to the account and the asset.

3. While financing/appraisal of credit requirements, funds flow analysis in conjunction with the cash flow analysis should be

done, rather than only concentrating on funds flow analysis.

4. The general perception among borrower is that it is lack of finance that leads to sickness and NPAs. However, Management

effectiveness in tackling adverse business conditions is a very important aspect that affects a borrowing unit‟s for-tunes.

5. During the exercise for assessment of viability and restructuring, a practical and integrated approach by all the lending banks/

FIs as also sharing of all relevant information on the borrower would go a long way toward overall success of rehabilitation

exercise, given the probability of success/failure.

METHODS FOR REDUCING NPAS 1. All accounts where interest has not been collected should be reviewed at periodical intervals by appropriate authorities. In

order to recover the amount, one can adopt any way like per-suasion, pressurization, frequent interaction, showing sympathy

etc.

2. Repayment of a term loan depends on income generating capacity of the borrowing unit. Therefore, it is necessary to fix

repayment programme for a term loan according to the in-come generating capacity of the unit.

3. After the classification of unit as sick, Bank can make a decision to offer a rehabilitation package. In that case, Bank has to

have a sympathetic and positive approach and provide the relief package in time.

4. Merger is the process under which a sick unit is merged with a healthy unit, or sometimes, a healthy unit acquires a sick unit.

A part of the consideration paid to the sick unit by the healthy unit is used to liquidate the NPA, wholly or partly.

5. Recovery of advances through compromise settlement is accepted as an effective non-legal remedy. Under this borrower

agrees to pay certain amount of the bank after getting certain concessions.

6. If all attempts of converting an NPA into a performing asset fail, the bank is left with no other option but to recall the

advance and resort to legal action by filing of recovery suits in the civil court or Debt Recovery Tribunals.

NON PERFORMING ASSETS OF PUBLIC SECTORS BANKS

Table 1

NPAs OF PUBLIC SECTORS BANKS

Year

Advances Non- Performing Assets (NPAS)

Gross Net

Gross Net

Amount % of Gross

Advances Amount

% of Net

Advances

2003-04 6,619.75 6,313.83 515.37 7.80 193.35 3.10

2004-05 8,778.25 8,489.12 483.99 5.50 169.04 2.10

2005-06 11,347.24 11,062.88 413.58 3.60 145.66 1.30

2006-07 14,644.93 14,401.46 389.68 2.70 151.45 1.10

2007-08 18,190.74 17,974.01 404.52 2.20 178.36 1.00

2008-09 22,834.73 22,592.12 449.57 2.00 211.55 0.90

2009-10 27,334.58 27,013.00 599.26 2.20 293.75 1.10

2010-11 30,798.04 33,056.32 746.00 2.40 360.00 1.20

2011-12 35,503.89 38,773.08 1,178.39 3.30 593.91 1.50

2012-13 45,601.69 44,728.45 1,656.06 3.60 900.37 2.00

2013-14 52,159.20 51,011.37 2,272.64 4.40 1,306.35 2.60

2014-15 56,167.18 54,762.50 2,784.68 5.00 1,602.08 2.90



Chart 1

NPA OF PUBLIC SECTORS BANK

NON PERFORMING ASSETS OF SCHEDULED COMMERCIAL BANKS

Table 2

NPA OF SCHEDULED COMMERCIAL BANKS

Year

Advances Non- Performing Assets (NPAS)

Gross Net

Gross Net

Amount % of Gross

Advances Amount

% of Net

Advances

2003-04 9,020.26 8,626.43 648.12 7.19 243.96 2.83

2004-05 11,526.82 11,156.63 593.73 5.15 217.54 1.95

2005-06 15,513.78 15,168.11 510.97 3.29 185.43 1.22

2006-07 20,125.10 19,812.37 504.86 2.51 201.01 1.01

2007-08 25,078.78 24,769.36 563.09 2.25 247.30 1.00

2008-09 30,382.54 29,999.24 683.28 2.25 315.64 1.05

2009-10 35,449.65 34,970.92 846.98 2.39 387.23 1.11

2010-11 40,120.79 42,987.04 979.00 2.44 417.00 0.97

2011-12 46,488.08 50,735.59 1,429.03 3.07 652.05 1.29

2012-13 59,718.20 58,797.73 1,940.53 3.25 986.94 1.68

2013-14 68,757.48 67,352.13 2,633.72 3.83 1,426.56 2.12

2014-15 75,606.66 73,881.79 3,233.45 4.28 1,760.93 2.38

-

20,000.00

40,000.00

60,000.00

80,000.00

1,00,000.00

1,20,000.00

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

20

13

-14

20

14

-15

NON- PERFORMING ASSETS (NPAs)NET % of Net Advances

NON- PERFORMING ASSETS (NPAs)NET AMOUNT

NON- PERFORMING ASSETS (NPAs)% of Gross Advances

ADVANCES GROSS AMOUNT

ADVANCES NET

ADVANCES GROSS



Chart 2

NPA OF SCHEDULED COMMERCIAL BANKS

NON PERFORMING ASSETS OF OLD PRIVATE BANKS

Table 3

NPA OF OLD PRIVATE BANKS

Year

Advances Non- Performing Assets (NPAs)

Gross Net

Gross Net

Amount % of Gross

Advances Amount

% of Net

Advances

2003-04 579.08 556.48 43.98 7.60 21.42 3.80

2004-05 704.12 677.42 42.00 6.00 18.59 2.70

2005-06 851.54 829.57 37.59 4.40 13.75 1.70

2006-07 948.72 928.87 29.69 3.10 8.91 1.00

2007-08 1,134.04 1,116.70 25.57 2.30 7.40 0.70

2008-09 1,303.52 1,285.04 30.72 2.40 11.59 0.90

2009-10 1,563.57 1,541.36 36.22 2.30 12.70 1 0.8

2010-11 1,872.96 1,846.47 36.00 1.90 9.00 0.50

2011-12 2,329.18 2,300.79 42.00 1.80 13.35 0.60

2012-13 2,731.20 2,699.37 52.10 1.90 20.06 0.70

0

20000

40000

60000

80000

100000

120000

140000

160000



Chart 3

NPA OF OLD PRIVATE BANKS

Table 4

NPA OF NEW PRIVATE BANKS

Year

Advances NON- PERFORMING ASSETS (NPAs)

Gross

Net

Gross Net

Amount % of Gross

Advances Amount

% of Net

Advances

2003-04 1,195.11 1,151.06 59.83 2.40 19.86 1.70

2004-05 1,274.20 1,236.55 45.82 1.60 23.53 1.90

2005-06 2,325.36 2,300.05 40.52 1.00 17.96 0.80

2006-07 3,252.73 3,218.65 62.87 1.10 31.37 1.00

2007-08 4,124.41 4,067.33 104.40 1.40 49.07 1.20

2008-09 4,547.13 4,468.24 138.54 1.70 62.52 1.40

2009-10 4,877.13 4,783.58 140.17 1.60 52.34 1.10

2010-11 5,450.14 6,128.86 145.00 1.30 34.00 0.60

2011-12 6,475.28 7,363.23 145.68 1.10 30.65 0.40

2012-13 8,860.23 8,733.11 158.61 1.00 39.00 0.40

2013-14 13,602.53 13,429.35 245.42 1.10 88.62 0.70

2014-15 16,073.39 15,843.14 341.06 1.30 141.28 0.90

Chart 4

2003-04 4%

2004-05 5%

2005-06 6%

2006-07 7%

2007-08 8%

2008-09 9%

2009-10 11%

2010-11 13%

2011-12 17%

2012-13 20%

Other 70%

NPAs of Old Private Banks



NPA OF NEW PRIVATE BANKS

Table 5

NPA OF FOREIGN BANKS IN INDIA

Year

Advances Non- Performing Assets (NPAs)

Gross Net

Gross Net

Amount % of Gross

Advances Amount

% of Net

Advances

2003-04 626.32 605.06 28.94 2.10 9.33 1.50

2004-05 770.26 753.54 21.92 1.40 6.39 0.80

2005-06 989.65 975.62 19.28 1.00 8.08 0.80

2006-07 1,278.72 1,263.39 22.63 0.80 9.27 0.70

2007-08 1,629.66 1,611.33 28.59 0.80 12.47 0.80

2008-09 1,697.16 1,653.85 64.44 1.50 29.96 1.80

2009-10 1,674.37 1,632.60 71.33 1.60 29.77 1.80

2010-11 1,993.21 1,955.39 50.00 1.00 12.00 0.60

2011-12 2,267.77 2,298.49 62.97 1.10 14.12 0.60

2012-13 2,604.05 2,636.80 79.77 1.30 26.63 1.00

2013-14 2,995.75 2,911.42 115.65 1.50 31.61 1.10

2014-15 3,366.09 3,276.15 107.71 1.40 17.57 0.50

Chart 5

NPA OF FOREIGN BANKS IN INDIA

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Series1 Series2 Series3 Series4 Series5

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CAUSES OF NPA An asset leads to NPA when the borrower fails to repay the interest and/or principal on agreed terms. Issue of NPA and its

impact on erosion of profit and quality of asset was not seriously considered in Indian banking prior to 1991. There are many reasons

cited for the alarming level of NPA in Indian banking sector. Asset quality was not prime concern in Indian banking sector till 1991,

but was mainly focused on performance objectives such as opening wide networks/branches, development of rural areas, priority

sector lending, higher employment generation, etc. But, RBI issued guidelines in 1993 based on recommendations of the Narasimham

Committee that mandated identification and reduction of NPAs to be treated as a national priority because NPA direct toward credit

risk that bank faces and its efficiency in allocating resources. Profitability and earnings of banks are affected due to NPA numbers.

One of the main causes of NPAs in the banking sector is the Directed loans system under which commercial banks are required to

supply 40% percentage of their credit to priority sectors. Most significant sources of NPAs are directed loans supplied to the ―micro

sector are problematic of recoveries especially when some of its units become sick or weak. The major cause for the NPA can be

attributed to:

1. Faulty lending policy and making compulsion lending to priority sector by banks.

2. Faulty credit management like defective credit in recovery mechanism, lack of professionalism in the work force.

3. Improper selection of borrowers/activities.

4. Unscientific repayment schedule and misutilisation of loans by user.

5. untimely communication to the borrowers regarding their due date and lack of sponge

6. Legal mechanism.

7. Weak credit appraisal system, Industrial problems and recession in market etc.

8. Legal impediments and time consuming nature of asset disposal process.

9. Political tool - Directed Credit to SSI and Rural sectors.

10. Manipulation by the debtors using political influence has been a cause for industrial bad debt being so high.

CONCLUSION

The industry is currently in a transition phase. On the one hand, the PSBs, which are the main pillar of the Indian

Banking system, are in trouble with excessive manpower, excessive NPAs and excessive governmental equity, while on the other

hand the private sector banks are consolidating themselves through adoption of latest technology and systems. PSBs, which currently

account for more than 78 percent of total banking industry assets are saddled with NPAs, falling revenues from traditional sources,

lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional

banking business model by way of their sheer innovation and service and adoption of modern technology. Private sector Banks have

pioneered internet banking, phone banking, anywhere banking, and mobile banking, debit cards, Automatic Teller Machines (ATMs)

and combined various other services and integrated them into the mainstream banking arena. While New Private Sector Banks and

Foreign Banks started with clean slate and latest technologies, the Public Sector Banks and Old Private Sector Banks had to overcome

the old systems and employee resistance and introduce the new systems and processes and norms. In spite of this the trend that could

be observed show that these Banks are putting in effort to catch up with the competition.

REFERENCES:

1. Santhanam, B (2005) “Banking and Financial System”, Fourth Edition, Margham Publication.

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Series1



2. C. R. Kothari (1985) Research Methodology Methods & Techniques, First Edition, Reprint 2009, New Age International (P)

Ltd.

3. ICFAI University (2006) An Overview of Banking, ICFAI September 2006

4. Shekhar & Lekshmy Shekhar, “Banking Theory Law and Practice” ( 20th

Edition), VIKAS Publishing House Pvt. Limited.

5. RBI economic reports 2015

6. www.wikipedia.org

7. Sonia & Dr.Rajeev kansal “Globalization and its impact on SSI in India” PCMA journal of business, vol-1, no.2, June 2009

8. V. A. Avadhani (2006) Marketing and financial services Third revised Edition reprint 2011 – Himalaya Publishing House.

http://www.wikipedia.org/

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