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CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Vindhya Bank's annual report shows Rs 480 crore of gross NPAs against gross advances of Rs 12,000 crore, and provisions held against NPAs of Rs 180 crore. Net NPAs are taken as gross NPAs less provisions. What are the gross NPA ratio and net NPA ratio (net NPA divided by net advances, where net advances are gross advances less provisions)?

The gross NPA ratio is 480 divided by 12,000, or 4 per cent. Net NPAs are 300 crore after deducting 180 crore provisions, and net advances are 11,820 crore, so the net NPA ratio is about 2.54 per cent.

  1. AGross 4%; net 2.54%Correct
  2. BGross 4%; net 2.50%
  3. CGross 3.75%; net 2.54%
  4. DGross 4%; net 4.00%

Explanation

Gross NPA ratio = 480/12,000 = 4%. Net NPA = 480 - 180 = 300. Net advances = 12,000 - 180 = 11,820. Net NPA ratio = 300/11,820 = 2.54%. Option B divides by gross advances (wrong base); option D ignores provisions.

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