Which Branch Deserves the Regional Performance Award?
The regional office is choosing one branch for its quarterly performance award from Alpha, Beta and Gamma. In Q1, Alpha had deposits of ₹400 crore and advances of ₹280 crore, with gross NPA of ₹14 crore; in Q2 its deposits were ₹460 crore, advances ₹322 crore and gross NPA ₹25.2 crore. Beta moved from deposits of ₹120 crore and advances of ₹90 crore with gross NPA of ₹4.5 crore in Q1 to deposits of ₹156 crore, advances of ₹117 crore and gross NPA of ₹5.85 crore in Q2. Gamma's deposits rose from ₹800 crore to ₹880 crore, advances from ₹600 crore to ₹630 crore, and gross NPA fell from ₹36 crore to ₹31.5 crore. CASA ratios were: Alpha 30% to 32%, Beta 40% to 41%, and Gamma 35% to 38%. The regional head has circulated a note saying Beta should win because it has the highest deposit growth. The award committee asks you to test that claim.
1. Calculate the gross NPA ratio for each branch in both quarters and identify which branch's asset quality deteriorated most.
Read the worked answer
Gross NPA ratio = gross NPA ÷ advances.
- Alpha: Q1 = 14 ÷ 280 = 5.00%; Q2 = 25.2 ÷ 322 = 7.83%. Deterioration = +2.83 percentage points.
- Beta: Q1 = 4.5 ÷ 90 = 5.00%; Q2 = 5.85 ÷ 117 = 5.00%. Stable.
- Gamma: Q1 = 36 ÷ 600 = 6.00%; Q2 = 31.5 ÷ 630 = 5.00%. Improvement = −1.00 percentage point.
Alpha deteriorated most. Its gross NPA rose from ₹14 crore to ₹25.2 crore-an 80% increase-while advances grew only 15%, so the ratio jumped. Beta's ratio is unchanged, but its NPA also grew 30% in line with advances. Gamma reduced absolute NPA while growing advances, which is the strongest asset-quality outcome.
2. The regional head says Beta should win because it has the highest deposit growth. Evaluate that claim using at least two quantitative adjustments.
Read the worked answer
Beta's deposit growth is (156 − 120) ÷ 120 = 30%, which is the highest percentage. But percentage growth alone is misleading for two reasons.
First, base effect. Beta added only ₹36 crore of deposits, against Alpha's ₹60 crore and Gamma's ₹80 crore. A 30% rate on a ₹120 crore base has less balance-sheet impact than Gamma's 10% on ₹800 crore. If the award is meant to reward contribution to the region, absolute increase matters.
Second, asset quality and CASA quality. Beta's NPA ratio stayed at 5.00%, so it did not improve asset quality; its CASA ratio improved only 1 percentage point. Gamma improved its NPA ratio by 1 percentage point and CASA by 3 percentage points. Alpha's deposit growth was 15%, but its NPA ratio rose sharply to 7.83%, which should disqualify it from a performance award unless the award is purely deposit-volume based.
The claim therefore uses one unadjusted metric and ignores scale and risk. Beta can be praised for high percentage growth, but it is not automatically the best overall performer.
3. Recommend a branch for the award and state one caveat the committee should record.
Read the worked answer
Recommend Gamma, on a balanced reading: it produced the largest absolute deposit increase (₹80 crore), reduced gross NPA from ₹36 crore to ₹31.5 crore while advances grew, improved its NPA ratio from 6.00% to 5.00%, and improved CASA by 3 percentage points-the best CASA movement of the three.
Caveat: Gamma's advances grew only 5%, against deposit growth of 10%, so part of the deposit increase may be sitting in low-yielding liquidity. The committee should check Gamma's credit-deposit ratio and yield on advances before treating the deposit mobilisation as fully productive. If the award is explicitly weighted toward deposit growth rate rather than absolute contribution and asset quality, Beta could be named, but the citation should disclose the small-base effect.