• Banking is the business of assets and liability. • The banks from where the deposits are taken could be saving and current account or term deposits so these are liabilities in banks' balance sheets. • So the people who have kept the deposits need to be paid back the principal amount with interest. • The money that has been kept in the bank will be kept in capital adequacy, the SLR ratio, and other reserves need to be parked in government securities from the security point of view. • The remaining money can be used to do the business. • The major business of the bank is giving loans. The loans given by banks are charged with extra interest. • The difference between the loan taking interest and the interest money deposited in the bank is the earning of the bank. • The money earned in this is the operating profit, apart from this there is another source of income as well like fees, etc. • Recently the term PPOP is used which means Pre Provisioning Operating Profit. • From these Pre-Provisioning Operating Profits, the bank needs to create provisions. • If the loan given by banks becomes NPA then there will be no interest nor the principal will be coming. • But ultimately the bank needs to give back the money of the depositor. So they based on the NPAs they need to make the provisioning of the money. • If the money is recovered for the NPA then it will be added back to the profit if not then they have to give it from the PPOP. • Provision amount made by the bank is an important thing while analyzing the bank.