Exploratory Factor Analysis for the Identification of Dimensions Which Cause Non-Performing Assets in Non-Banking Financial Institutions

GIS Business ◽  
2017 ◽  
Vol 12 (5) ◽  
pp. 60-74
Author(s):  
K. S. Rajeev ◽  
Suresh Subramoniam
Keyword(s):  
Factor Analysis ◽  
Public Sector ◽  
Exploratory Factor Analysis ◽  
Financial Institutions ◽  
Evaluation System ◽  
Financial Institution ◽  
Capital Adequacy ◽  
High Interest Rate ◽  
Public Sector Banks ◽  
High Interest

According to Reserve Bank of India (RBI) Governor, public sector banks are having stressed accounts equivalent to over Rs.7 lakh Crores including non-performing assets (NPA) and restructured loans (News Asia, 2016). RBI has also pointed out that gross NPA of public sector banks has risen to 6.03% during June 2015 from 5.20% during March 2015. As banks have growing huge bad debts, steps are being laid down by the RBI and the government to help lending banks clean up their balance sheet by 2017. NPAs impact bank growth or stability and deteriorate profits, increase provisions, reduce reserves, affect capital adequacy, increase market borrowings, drop share values, build negative image about the economy and high interest rates. In order to compensate for the money lost in the form of interest in NPAs, banks have to charge high interest rate from other borrowers. This will have indirect impact on inflation and results in negative impact on development. Overall development of the country will also get affected due to NPA by way of unemployment, business exit due to inability to meet its loan repayment obligations, instability of the banking system, and liquidity crisis. A detailed analysis on the factors which cause NPA has become a high priority research agenda in the present day context. A questionnaire is developed for the purpose to acquire and analyse data to identify factors which cause NPA. Also, an exploratory factor analysis has been carried out to identify factors which contribute to growing NPA in financial institutions. Purpose: The purpose of this paper is to identify factors which cause non-performing assets in non-banking financial institutions. Design or methodology or approach: A questionnaire has been developed to gather data from 120 professionals who are involved in the process of granting or recovering loans in non-banking financial institutions in India and appropriate statistical techniques have been used to test for statistical significance. Findings: As a result of exploratory factor analysis, three components with corresponding factors are identified for the cause of non-performing assets in non-banking financial institutions. These are component 1 which is professional incapability of the borrower in running the firm leading to NPA, component 2 related to borrower nature in wilful default and his or her influential nature on financial institution and government resulting in NPA and, component 3 due to weak internal policy of the firm or external environment which aid non-repayment of loan. Component 1, component 2, and component 3 have nine factors, seven factors, and six factors associated with them, respectively, as explained in the paper. Research limitations or implications: The study identified the factors which are to be critically analysed prior to granting loan so that chance of the loan becoming NPA can be minimised. The success of this finding depends on suitably designed electronic credit worthiness evaluation system that evaluate the borrower. Originality or value: The identification of various factors which contribute to non-performing assets and to take suitable measures to control them is a high priority agenda for any financial institution and this research is directly oriented towards that direction.

scholarly journals A Systematic Review on Non-Performing Assets in Banks in India

2021 ◽  
Vol 12 (2) ◽  
pp. 177-184
Author(s):  
Aniket Pundir , Et. al.
Keyword(s):  
Systematic Review ◽  
Public Sector ◽  
Financial Institutions ◽  
Financial Institution ◽  
Financial Sector ◽  
Revenue Generation ◽  
Public Sector Banks ◽  
Day By Day

Lending is a cruttial part of financial sector that is Banks/NBFCs in India. It is main revenue génération business of Bank/NBFCs. Financial Institution i.e. Bank and NBFCs used to borrow funds from the market i.e. from other institution & public and then lend the same again to its clients to gain profits to its owners/investors. There were 27 Public Sector Banks in India (Incl. SBI Associates Banks) before announcement of merger of some Banks by Union Govt. Of India in the year 2019 and there are multiple other Pvt. Sector Banks and NBFCs, co-operative bank and regional rurul bank which we studied in this paper. Lending business of the Banks/NBFCs is facing slowdown in recent years. Non-Performing Assets are increasing day by day which is creating big problem not only to financial sector i.e. Bank/NBFCs but also for other industries. In this paper we will systemtically review the literature/artiles already pubilshed on NPAs in India and to know the main reasons and factor which are resposible for rising NPA in financial institutions and to find out scope of further research on this topic.

Analysis of Financial Performance of Public Sector Banks in India: CAMEL

2020 ◽  
pp. 097674792096686
Author(s):  
Yudhvir Singh ◽  
Ram Milan
Keyword(s):  
Public Sector ◽  
Banking Sector ◽  
Positive Impact ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Factors Affecting ◽  
Public Sector Banks ◽  
The Government ◽  
And Performance ◽  
Asset Quality

Public sector banks have been merged by the government in the last few years. This is the rationale behind conducting this study. The purpose of this article is to determine the factors affecting the performance of public sector banks in India and the interrelationship between bank-specific determinants and performance of public sector banks. In this article, we shall analyse the financial data of all the public sector commercial banks for a period spread across 11 years (2009–2019); Capital adequacy, Assets quality, Management efficiency, Earning, and Liquidity (CAMEL) has been used as a performance determinant; system generalised method of moments (GMM) analysis has been used to find the effect of determinants on the performance measurement of public sector banks; and CCA (canonical correlation analysis) has been used to find the interrelationship between the bank-specific determinants and the performance of public sector banks. The finding has important implications in terms of performance in the banking sector. Certain limitations of this study are: It is based on secondary data. The study only covers the financial aspects and not the non-financial aspects. It is found that the asset quality is negatively related with performance of public sector banks. Liquidity and inflation are inversely related to performance of public sector banks in India. Capital adequacy is positively related with banks’ performance, but inversely related with banks’ interest margin. GDP growth has a significant positive impact on banks’ performance, but inversely related with banks’ interest income. Inflation rate is inversely related with banks’ performance. Banking sector reforms are insignificantly related with banks’ performance.

scholarly journals Bad Loans of Public Sector Banks in India: A Panel Data Study

2019 ◽  
Vol 5 (1) ◽  
pp. 22-30
Author(s):  
Kandela Ramesh
Keyword(s):  
Public Sector ◽  
Panel Data ◽  
Financial Stability ◽  
Random Effect ◽  
Random Effect Model ◽  
Negative Relationship ◽  
Banking System ◽  
Capital Adequacy ◽  
Public Sector Banks ◽  
Bad Loans

The soundness of the banking system is necessary for economic advancement and financial stability. In the contemporary era, the Indian banking system has suffered from the accumulation of substantial non-performing assets (NPAs), especially in the public sector banks (PSBs). This article examines the financial determinants of bad loans in the Indian PSBs with the help of panel data regression analysis. Panel dataset of 21 Indian PSBs for eight years from 2010 to 2017 is used for the study. For analysis, net non-performing assets (NNPAs) as a dependent variable and financial indicators as independent variable are used. Using the random effect model, it is found that credit–deposit ratio, loan maturity, and return on assets have a negative relationship with NNPAs. These factors have an association with a lower level of NPAs. Operating expenses and capital adequacy ratio have an insignificant effect on NNPAs. On the other hand, factors such as priority sector loans, collateral values, and non-interest income have a positive impact on NNPAs. These factors are an indication of a higher level of bad loans and are adding to the accumulation of NPAs in PSBs.

Strategies to promote collaborative governance regime in Indian rural road maintenance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tharun Dolla ◽  
Boeing Laishram
Keyword(s):  
Factor Analysis ◽  
Public Sector ◽  
Exploratory Factor Analysis ◽  
Asset Management ◽  
Collaborative Governance ◽  
Underlying Structure ◽  
Road Maintenance ◽  
Content Type ◽  
The Public ◽  
Infrastructure Maintenance

PurposeEffective maintenance of rural roads is an essential aspect of public infrastructure delivery. However, governments failed to upkeep the built infrastructure. Accordingly, this study addresses this pressing issue by identifying attributes, skills and resources for asset maintenance. To do this, collaborative governance, a recent plausible alternative in the public policy literature, is used.Design/methodology/approachThe literature review proffered 29 strategies for operationalising collaborative governance principles. A questionnaire survey with the public sector representatives comprising top-level, mid-level and lower-level engineers was used to test the applicability of these strategies in rural infrastructure maintenance of India. The rated responses concerning strategies were subjected to exploratory factor analysis to determine the underlying structure for reducing the dimensions to make them practically operational.FindingsThe exploratory factor analysis showed that six dimensions play an essential role in initiating and promoting collaboration. This parsimonious framework suggests building a common collaborative framework, communicating vision and fostering communities, leadership, increasing the industry's capacity, transparency of power and responsibilities, and technical and financial resources. Thus, governments’ initiatives to build collaboration is most prominent in initiating and sustaining a successful collaboration.Practical implicationsThe practical strategies reinforced through this study can formalise self-initiated regimes or independently convened regimes to a federally directed regime well within the scope of the national programmes. Thus, findings primarily have considerable implications to emerging countries where reducing the unit costs to save the public exchequer from wastage and preventing assets from becoming dilapidate are essential.Originality/valuePublic sector practitioners often lack the essential skills and innovative thinking and thus offered new knowledge would transform the traditional practices in infrastructure maintenance. Theoretically, the present research advances the understanding of structures and processes for collaborative governance theory to non-contractual infrastructure asset management literature.

The effects of traditional practices on modern banking system

2016 ◽  
Vol 34 (4) ◽  
pp. 476-500
Author(s):  
Divya Mittal ◽  
Shiv Ratan Agrawal
Keyword(s):  
Factor Analysis ◽  
Public Sector ◽  
Banking System ◽  
Traditional Practices ◽  
Banking Services ◽  
Content Type ◽  
Public Sector Banks ◽  
Confirmatory Factor ◽  
Employee Responses ◽  
Employee Response

Purpose – The purpose of this paper is to identify the traditional practices in the modern banking system (MBS) and examine the effects of these on employee response, customer reactions and customer loyalty, in the context of public sector banks in India. The study also investigates the effects on customers of employees’ use of traditional banking practices in the MBS. Design/methodology/approach – A total of 460 usable responses were gathered from customers of seven public sector banks in Bhopal (MP), India. The study scales were refined and validated by exploratory factor analysis and confirmatory factor analysis. Findings – The results indicated that the MBS utilising traditional practices (MBSTP) significantly influences unfavourable employee responses, customer reactions and loyalty. In addition, employee responses in MBSTP motivate and generate unfavourable reactions of customers, which further influence their loyalty adversely towards public sector banks. Practical implications – The identified traditional practices with MBS are expected to bring clarity to the issue of employee response, customer reaction and loyalty. This would help the management of banks. Originality/value – The results of the analysis indicated that public sector banking services are facing the internal challenges by its own service processes and employees’ behavioural intentions.

A Step toward a Common Measure of Organizational Justice

2010 ◽  
Vol 106 (2) ◽  
pp. 407-408 ◽  
Author(s):  
Saree Maharee-Lawler ◽  
John Rodwell ◽  
Andrew Noblet
Keyword(s):  
Factor Analysis ◽  
Public Sector ◽  
Organizational Justice ◽  
Exploratory Factor Analysis ◽  
Standard Error ◽  
Future Research ◽  
Four Dimensions ◽  
Scree Test ◽  
Representative Samples

Dimensions of the organizational justice construct were examined in a public sector context utilizing an organizational justice measure developed by Colquitt in 2001. Exploratory factor analysis and standard error scree test supported four dimensions of justice as measured by Colquitt's scale. There was evidence of a new factor called procedural-voice justice that taps a possible association with the concept of voice. Future research on organizational justice must investigate its dimensionality based on more representative samples to develop a more globally applicable measure.

scholarly journals DETERMINANTS OF PRIORITY SECTOR LENDING OF INDIAN PUBLIC SECTOR BANKS: AN ECONOMETRIC ANALYSIS

2017 ◽  
Vol 5 (7) ◽  
pp. 461-473
Author(s):  
Santosh Kumar Panda ◽  
Ganesh Prasad Panda ◽  
Anil Kumar Swain
Keyword(s):  
Developing Countries ◽  
Public Sector ◽  
Financial Institutions ◽  
Small Businesses ◽  
Commercial Banks ◽  
Secondary Data ◽  
The Public ◽  
Public Sector Banks ◽  
Number Of Factors ◽  
Policy Suggestions

Compulsory sanctioning credit or priority sector lending (PSL) is part of the regulatory framework for commercial banks/ financial institutions in many countries, both developing and developed. However, compliance and lending effectiveness of such programs may be determined by a number of factors. This may be particularly so in developing countries, where availability of finance for the vulnerable sectors likes agriculture, small businesses, weaker sections, are scarce. The present paper aims at examining the patterns of priority sector lending by banks, with a view to identifying the factors which determine this lending The paper is based on an analysis of secondary data relating to priority sector lending (2006-07-2015-16) for the Public sector banks in India. The results indicate gaps in patterns of the sect oral target compliance by different bank groups, along with the lending preferences and challenges faced by banks in such lending. It also identifies bank-specific characteristics like the nature of ownership, size, performance, etc., which have a significant impact on the priority sector lending patterns. Based on its findings, the paper offers policy suggestions for improving the effectiveness of priority sector lending program.

scholarly journals A Study of Priority Sector Lending with special reference to Selected Public Sector Banks in Shimoga District

2020 ◽  
Vol 8 (1) ◽  
pp. 51-55
Author(s):  
S Manjushree ◽  
K V Giridhar
Keyword(s):  
Public Sector ◽  
Special Reference ◽  
Financial Institution ◽  
Secondary Data ◽  
Statistical Tool ◽  
Public Sector Banks ◽  
Irrigated Area ◽  
The People ◽  
Efficient Planning ◽  
The Government

A financial institution has a major role to play in the development of any district as they provide financial assistance to the people who take up income-generating activity. The district is predominantly agriculture having 58% land id irrigated area and 42% rain-fed area. Efficient planning facilitates optimal and needs-based use of available resources for meeting the development needs of the region in an equitable and scientific manner. Priority sector lending is a scheme guided by the Government. As per RBI directive, commercial banks advised granting 40% of their total advances to borrowers in the priority sectors. Priority means to give preference and privilege. This paper provides a platform to understand priority sector lending by public sector banks with special reference to shivamogga district. The District credit plan of shivamogga district during the year 2019-2020 provides the information of outlay. An outlay of Rs.3395 crores has been provided for agriculture out a total priority outlay of RS.6262 crores. The study has used both primary and secondary data. The collected data are embodied by using tables, and analysis was done by using percentage analysis and a statistical tool like X2 test is also used.

scholarly journals Public sector innovation performance in Federation of Bosnia and Herzegovina: An exploratory factor analysis

2021 ◽  
Vol 7 (1) ◽  
pp. 13-30
Author(s):  
Lamija Krndzija
Keyword(s):  
Factor Analysis ◽  
Public Sector ◽  
Exploratory Factor Analysis ◽  
Bosnia And Herzegovina ◽  
Innovation Performance ◽  
Sources Of Information ◽  
The Public ◽  
Public Sector Innovation ◽  
Societal Challenges ◽  
Main Components

Abstract Innovation has nowadays become the main force to cope with challenging times in the fast-changing world. The influence of public sector innovation (PSI) in resolving dynamic economical and societal challenges is undisputable. Regardless of the numerous advantages of innovation in the public sector (PS) which have been recognised worldwide, the concept of public sector innovation is still novel for the Federation of Bosnia and Herzegovina (FBiH). Moreover, there is limited empirical evidence which would facilitate the understanding of public sector innovation performance. The purpose of this paper is to identify main components of PSI performance. The primary research data was obtained through a survey with close-ended questions which was completed by the public sector institution employees in FBiH. The exploratory factor analysis (EFA) was used in order to determine the principal components of measuring public sector innovation performance. The EFA returned the factor-structures for all four suggested constructs, innovation capabilities, wider sector conditions for innovation, sources of information and the share of creative occupation, explaining between 65% and 78% of the variance of the innovation performance measurement construct. The results from the exploratory factor analysis provided a distinct estimation on the factor structure of measuring PSI. The paper has provided and analysed the first instrument in measuring public sector innovation performance in FBiH.

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