Impact of Non-Performing Assets(NPA) on Working of Banks: A Comparative Study between SBI Corporate and SBI Patna Circle

During FY 2016–17, a comparative study was made to investigate the impact of NPA on working of the State Bank of India (Corporate) and SBI Patna Circle. After analysing the data it was concluded that Credit-Deposit ratio (%) in the circle was just 42.96% as compared to the national average of 80.38%. However, as per direction of the government, the bank had taken many steps to increase its advances. Due to such steps, average growth in credit-deposit ratio (%), gross advances and priority sector advances were increased more than the SBI's national average and during 2016–17, the circle had priority sector advances as 71.2% of its total advances. However, on one hand, quality of assets had deteriorated and the circle had comparatively more growth in substandard and doubtful assets and on the other side, lower growth was registered in total assets, total business, per employee business, capital adequacy ratio (%), other income, other income (%) and total deposits. Consequently, due to poor repayments of loans and interests, comparatively higher growth rate in gross NPA, gross NPA (%), and net NPA (%) was registered, which forced the circle to make comparatively more provision for NPA. Such increased the total expenses and cost of deposit (%) of the circle and had bad impacts on net interest income and ultimately to the total income of the circle. Similarly, more negative growth in net interest income (%), cost to income ratio (%), net interest margin (%), yield average on advances (%), and average return on assets (%) was witnessed. Ultimately, due to such bad impacts of NPA, the circle had lower growth average in operating profit, per employee profit and net profit as compared to the national average of the SBI.