scholarly journals NPAs in Indian Scheduled Commercial Banks: Origination and Impact on Economy

2019 ◽  
Vol 8 (2S6) ◽  
pp. 538-541
Keyword(s):  
Banking Sector ◽  
Global Financial Crisis ◽  
Capital Adequacy ◽  
Credit System ◽  
Secondary Sources ◽  
Root Cause ◽  
Reserve Bank ◽  
Capital Adequacy Ratio ◽  
Financial Soundness ◽  
The Government

Mounting non-performing assets (NPAs) in the Indian banking sector has been drawing the attention of policymakers, economists, academicians, and other stakeholders. More particularly, during the last ten years, the rise in NPAs of banks has sent the alarming bell both to the Reserve Bank of India and the Government. Per a few studies, one of the root cause for the huge and gigantic rise in NPAs is the 2008 global financial crisis besides lending to Priority sector. The necessity of provisions and high funding costs has also caused an increase in NPAs while bringing down the profitability of banks. Hence, the consequent impact of NPA includes poor recycling of funds due to the weak deployment of credit which potentially could thwart the financial soundness of the credit system. Higher NPAs not only shakes the confidence of investors, depositors, lenders, etc., but also imperil liquidity, solvency position, profitability, capital adequacy ratio, and so on. A few measures that are required for management of NPAs like the establishment of monitoring department, reformulation of banks’ credit appraisal techniques, among others. The paper examines the trends of NPAs and the factors responsible for mounting NPAs in the banking sector from non-identical aspects. The use of secondary sources of data from authentic websites of RBI, Finance Ministry, and Banks has been made.

scholarly journals A Study of Non Performing Advances and It’s Management With Special Reference to Punjab National Bank

2021 ◽  
pp. 507-512
Author(s):  
Dr. Martha Sharma
Keyword(s):  
Banking Sector ◽  
Negative Impact ◽  
Capital Adequacy ◽  
Reserve Bank ◽  
Capital Adequacy Ratio ◽  
National Bank ◽  
Performance Area ◽  
Definition Of ◽  
Reserve Bank Of India

Banking industry plays an important role in the development of an economy. Banks have become very cautious in extending loans. The reason being mounting non-performing assets (NPAs). NPAs put negative impact on the profitability, capital adequacy ratio and credibility of banks. It is defined as a loan asset, which has ceased to generate any income for a bank whether in the form of interest or principal repayment. As per the prudential norms suggested by the Reserve Bank of India (RBI), a bank cannot book interest on an NPA on accrual basis. In other words, such interests can be booked only when it has been actually received. Therefore, this has become what is called as a ‘critical performance area’ of the banking sector as the level of NPAs affects the profitability of a bank. This paper touches upon the meaning and consequently the definition of a non-Performing asset, the conceptual framework of non-performing assets, classification of loan assets and provisions. The study also evaluates the adverse effect of non-performing assets on the return on total assets of Punjab National Bank Limited for the period 2013 to 2015, 2016-17, and 2019-20. Particularly discussing some remedial measures taken up by the Bank to overcome this situation of NPA.

scholarly journals An Impact of Capital Adequacy Ratio on the Profitability of Private Sector Banks in India – A Study

2021 ◽  
Vol 11 (5) ◽  
Author(s):  
Jayesh J Jadhav ◽  
Ashish Kathale ◽  
Shreeya Rajpurohit
Keyword(s):  
Private Sector ◽  
Banking Sector ◽  
Bank Lending ◽  
Study Data ◽  
Capital Adequacy ◽  
Minimum Capital ◽  
Reserve Bank ◽  
Capital Adequacy Ratio ◽  
Proportionate Change ◽  
Research Tools

Profitability being one of the cardinal principles of bank lending acts as a game changer for the survival and success of private sector banks in India. In order to stay profitable, banks have to capitalise on every penny advanced to yield the expected returns. However, considering the constraints laid down by the Reserve Bank of India, banks have to maintain a minimum capital adequacy ratio, as per the current BASEL III regulations active in India. With the mergers of public sector banks, the challenge has got just tougher for the private sector banks in India. Expansion and Diversification are the key strategies adopted by the key players from the private banking sector, however, with the minimum capital adequacy ratio observed by them, it is necessary to understand its actual impact on the bank’s profitability. This research paper aims to throw light upon the linkage that capital adequacy has with the bank’s profitability. It attempts to establish a relation between the Capital Adequacy Ratio with the Net profits of the bank. For the purpose of this study, data from the past 5 years of the leading private sector banks has been collected, namely, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, AXIS Bank and YES Bank. The collected data has been analysed using Pearson’s Correlation to establish a relation between the CAR Ratio & the bank’s profitability. Hypothesis testing has been further done to study the quantum of proportionate change in the profitability with a change in the CAR Ratio for private sector banks using applicable research tools. The said research tools are applied to achieve the desired results while maintaining the required quantum of accuracy. It also aims to understand the proportionate impact of changes in CAR to the bank’s profitability, which can act as a suggested measure for banks to develop a reliable framework for efficient capital management and increase overall efficiency. The results derived from the data collected and analyzed aim to pro

scholarly journals An Empirical Study on the Big Consolidations of Indian Banking Industry

2019 ◽  
Vol 7 (3) ◽  
pp. 102-108
Author(s):  
T P Ram Prasad ◽  
T T Karthik
Keyword(s):  
Empirical Study ◽  
Banking Sector ◽  
Banking Industry ◽  
Level Structure ◽  
Secondary Sources ◽  
Reserve Bank ◽  
The Government ◽  
Reserve Bank Of India

India declared a broad consolidation of state-claimed banks that will see 10 of them being merged to frame four greater moneylenders to reinforce a sector battling with a terrible advance cleanup and planned for making loan specialists of worldwide scale that can bolster the economy’s flood to $5 trillion by 2024. The government additionally reported administration changes to improve their wellbeing. This was the most recent in a progression of announcements by the government since a week ago as it looks to animate demand and resuscitate the economy. In a different announcement, the government said development had dropped to a six-year low in the quarter to June. The most recent consolidation move will slice the quantity of state-claimed loan specialists to 12 from 27 of every 2017, Sitharaman stated, featuring the banking changes embraced by the Narenda Modi government that have likewise included noteworthy cleaning up of asset reports. This isn’t the first occasion when that the possibility of merging state-claimed banks has picked up momentum. In his way breaking 1991 report on banking sector changes, M. Narasimham, a former Reserve Bank of India senator, had recommended mergers to shape a three-level structure with three enormous banks with international nearness at the best, eight to 10 national banks at level two, and countless provincial and nearby banks at the base. Afterward, the P.J. Nayak Committee had additionally recommended that state-run banks ought to either be merged or privatize. To be sure, as per Indian Banking Association information, there have been in any event 49 mergers since 1985. Hence, the present study has been focused to highlight the brief of top vital consolidation on Indian Banking sector and study based on secondary sources of data.

scholarly journals Why Banks Need Adequate Capital Adequacy Ratio? A Study of Lending & Deposit Behaviors of Banking Sector of Pakistan

2018 ◽  
Vol 4 (1) ◽  
pp. 1-16
Author(s):  
Sakina Narmeen ◽  
Irum Saba ◽  
Rehana Kouser ◽  
Haris Khurram
Keyword(s):  
Panel Data ◽  
Banking Sector ◽  
Banking Industry ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Leverage Ratio ◽  
Secondary Sources ◽  
Capital Adequacy Ratio ◽  
The Impact

This study focuses on the impact of Capital Adequacy Ratio on bank’s lending and deposit behavior and also on the importance of maintaining certain level of capital reserve. CAR is examined using two different ratios leverage ratio and risk-based capital ratio. This study is beneficial for the banking industry in determining enough CAR and to make decision for taking deposits and issuing loans. The sample of the study includes 25 banks of Pakistan; 20 conventional and 5 Islamic banks and the study period is of 10 years. Panel data methodology is used. Data is collected from secondary sources. Findings show that CAR has impact on change in capital and change in loans.

scholarly journals The Relationship between Bank Specific Characteristics and the Extent of Disclosure: Evidence from the Banking Sector in Bangladesh

2021 ◽  
Vol 10 (2) ◽  
pp. 89-102
Author(s):  
Sumi Saha ◽  
Taposh Kumar Neogy
Keyword(s):  
Regression Analysis ◽  
Significant Relationship ◽  
Banking Sector ◽  
Study Data ◽  
Capital Adequacy ◽  
Return On Assets ◽  
Secondary Sources ◽  
Capital Adequacy Ratio ◽  
Net Profit ◽  
Equity Ratio

The fundamental motive of this study is to inspect the extent of disclosure of the banking companies in Bangladesh. To calculate the disclosure score of each sample bank, the un-weighted disclosure index has been used. To reveal the findings of this study, researchers have considered five conventional private commercial banks. A period of five years ranging from 2013 to 2017 has been selected for the study. Data have been collected from secondary sources and different statistical techniques like descriptive statistics as well as regression analysis with the respective models have been employed. The study reveals that the average disclosures scores of the sample banks are at a satisfactory level and the significant variation doesn’t exist in the disclosure scores among the sample banks. Multiple regression analysis has been conducted to know whether the significant relationship is available between the extent of disclosure and the specific characteristics of banks and the evidence confirm that the significant relationship is existing between the extent of disclosure and earnings per share, return on assets as well as net profit but not between the disclosure scores and capital adequacy ratio, debt-equity ratio, current ratio, loan deposit ratio, market capitalization ratio as well as total assets. 

scholarly journals DAMPAK PENERBITAN DAN PENJUALAN SURAT UTANG NEGARA BAGI PEREKONOMIAN INDONESIA

2017 ◽  
Author(s):  
Irma Setyawati
Keyword(s):  
Banking Sector ◽  
Descriptive Analysis ◽  
Capital Adequacy ◽  
Government Bond ◽  
Interest Payment ◽  
Library Research ◽  
Capital Adequacy Ratio ◽  
Bond Property ◽  
The Government ◽  
The Impact

The edition and the sale of the country's obligation letter/government bond give the impact to the banking sector, monetary, and fiscal, as well as the monitory authority. The objective of the study is to verify the impact of the edition and the sale of the government bondfor lndonesia economy. The methods used are descriptive analysis of the collected data from library research and other resources related to the topic.The research found that the impact to the Capital Adequacy Ratio is getting better, the impact to the monetary is the increase of the money quantity as much as the interest payment given by the government conserving the government bond property, the impact to the monetary authority is the decrease of liquidity support and the increase of lndonesian Bank outstanding to the government. The sale of government bond gives fresh fund to the government which can be invested, to the productivity asset, to support the process of economy recovery Post print

scholarly journals Evaluating the Financial Soundness of Small and Medium-Sized Commercial Banks in Kenya: An Application of the Bankometer Model

2019 ◽  
Vol 11 (6) ◽  
pp. 93 ◽  
Author(s):  
Moses O. Ouma ◽  
Gabriel N. Kirori
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Operating Cost ◽  
Poor Performance ◽  
Capital Adequacy ◽  
Financial Health ◽  
Operating Income ◽  
Capital Adequacy Ratio ◽  
Significant Difference ◽  
Financial Soundness

The study investigated the financial soundness of small and medium-sized commercial banks in Kenya over the four-year period, 2014 to 2017, using the bankometer model and further compared the financial health of the two bank categories. The study employed secondary data from a census of Twelve (12) medium-sized and Sixteen (16) small banks, with the financial soundness being proxied by the overall solvency score (S-Score) in order to achieve its objective. A total of six (6) different financial ratios namely, Capital to Assets ratio, Equity to Assets ratio, Capital Adequacy Ratio, Non-Performing Loans ratio, Operating Cost to Operating Income ratio and the ratio of Loans to Assets were used in the study to measure the degree of financial health of the banks. One of the key findings of the study was that both the small and medium-sized commercial banks in Kenya were financially sound during each of the four (4) years studied, with no significant difference in the financial soundness of the two bank categories. Other findings were that all the banks studied experienced poor performance in loans and operations while two banks had below the benchmark capital adequacy ratio. The findings of the study are important in that, they can be used to formulate policies and strategies for promoting improvement in the financial performance of the banking sector in particular and the business sector at large in the country.

The Systemic Effects of Prudential Regulation Toughening:The Results of a Stress-test for Russian Banks

2012 ◽  
pp. 4-31 ◽  
Author(s):  
M. Mamonov ◽  
A. Pestova ◽  
O. Solntsev
Keyword(s):  
Financial Services ◽  
Banking Sector ◽  
Stress Test ◽  
Credit Market ◽  
Capital Adequacy ◽  
Government Support ◽  
Government Ownership ◽  
Prudential Regulation ◽  
The Government ◽  
The Stability

The stability of Russian banking sector is threatened by three negative tendencies - overheating of the credit market, significant decrease of banks capital adequacy ratios, and growing problems associated with banks lending to affiliated non-financial corporations. The co-existence of these processes reflects the crisis of the model of private investments in Russian banking sector, which was observed during the last 20 years. This paper analyzes the measures of the Bank of Russia undertaken to maintain the stability of the banking sector using the methodology of credit risk stress-testing. Based on this methodology we conclude that the Bank of Russias actions can prevent the overheating of the credit market, but they can also lead to undesirable effects: further expansion of the government ownership in Russian banking sector and substitution of domestic credit supply by cross-border corporate borrowings. The later weakens the competitive positions of Russian banks. We propose a set of measures to harmonize the prudential regulation of banks. Our suggestions rely on design and further implementation of the programs aimed at developing new markets for financial services provided by Russian banks to their corporate and retail customers. The estimated effects of proposed policy measures are both the increase in profitability and capitalization of Russian banks and the decrease of banks demand for government support.

Basel Capital Adequacy Ratio Standard in The Light of Islamic Law Perspective

2016 ◽  
Vol 1 ◽  
pp. 308-317
Author(s):  
Adi Rahmanur Ibnu
Keyword(s):  
Financial Crises ◽  
Global Economy ◽  
Banking Sector ◽  
Islamic Law ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Minimum Capital ◽  
Capital Adequacy Ratio ◽  
Global Banking ◽  
Banking Development

Bank is one of the most important pillars of economy activities. However, banking sector has a real potential crisis threat. Alongside with the steady current global banking development, financial crises that have happened clearly affected global economy. Based on that situation, BIS (Bank for International Settlement) – an international financial standard setting organization, realizes the urgency to establishan international financial standard and supervision to anticipate future potential financial crises. This research aims to identify how Capital Adequacy Ratio Standard in Basel Capital Accord (II) based on Islamic law perspective. The research is conducted by analyzing Basel Capital Accord published by BIS. The research uses library research method to find out the aimed result. The focus is on the 1st pillar of Basel II publication that is Minimum Capital Requirements (CAR) policy. CAR, as an Islamic economics policy, will be analyzed using falāḥ approach. Falāḥ is an Islamic economics objective that consists of happiness, success, accomplishment or good luck concept. The earthly dimension of falāḥ has some parameters that can be used to analyze Islamic economics policy. Additionally, the Islamic fiqh maxim takes part in analyzing the policy. The maṣlaḥat concept in fiqh maxim approach shares aim with falāḥ concept in the sense that all of sharia law aims for success, happiness, eternal survival etc. The maṣlaḥat can be accomplished by extinguishing mafsadat or seizing maṣlaḥat. The maṣlaḥat aspect is essential to determine the compatibility Basel Capital Accord with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl). The conclusion results are, 1) Basel Capital Accord focuses on macro-prudential aspect in order to anticipate potential financial crises, 2) beneficial/interest (maṣlaḥat) aspects of the hereafter, cooperation principle, justice, fairness and the prohibition of exploitation are not the core value of Basel Capital Accord frame work, thus 3) the achievement of maslahat as intended by sharia i.e. jurisprudential maxim are not convincing. Therefore, 4) Basel Capital Accord as a regulation basis is not in line with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl).

STUDY OF CAMEL RATING SYSTEM IN BANKING SUPERVISION- A CASE STUDY OF NEPAL BANGLADESH BANK LTD

2018 ◽  
Vol 1 (3) ◽  
pp. 74-96
Author(s):  
Dr. S.U. Gawde ◽  
Prof.. Alekha Chandra Panda ◽  
Prof. Devyani Ingale
Keyword(s):  
Banking Sector ◽  
Capital Adequacy ◽  
Rating System ◽  
Financial Risks ◽  
Economic Activities ◽  
Effective Measure ◽  
Critical Elements ◽  
Financial Soundness ◽  
The Usa ◽  
Asset Quality

The banking sector  plays in important role in the country’s economy, acting as an intermediary to all industries. As the banking sector has a major impact on the economy as a whole. Performance evaluation of the banking sector is an effective measure and indicator to check the soundness of economic activities of an economy. Many methods are employed to analyse banking performance. One of the popular methods is the CAMELS framework, developed in the early 1970’s by federal regulators in the USA. The CAMELS rating system is based upon an evaluation of six critical elements of a financial institution’s operations: Capital adequacy, Asset quality, Management soundness, Earnings and profitability, Liquidity, and Sensitivity to market risk. Under this bank is required to enhance capital adequacy, strengthen asset quality, improve management, increase earnings, maintain liquidity, and reduce sensitivity to various financial risks. In the present study an attempt was made to evaluate the performance & financial soundness of NEPAL BANGLADESH BANK LTD using CAMEL approach. Quantitative parameters are computed and updated on a quarterly basis while in respect of the qualitative parameters the ratings / marks given at the time of previous on-site examination

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