Non Performing Assets: A Study on Public Sector Banks in India

Abstract

Banks plays an important role in the economic development of a country. Banks are growth-driver and the banking business is exposed to various risk, such as credit risk, liquidity risk, interest risk, market risk, operational risk and management risk. Apart From these risks the very important risk is loan recovery. The sound financial position of a bank depends upon the recovery of loans or its level of Non-performing assets (NPAs). Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of provisions, which bring down the overall profitability of banks. The Indian banking sector is facing a serious problem of NPA. The magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled. In this paper an attempt is made to analyze the external factors like ineffective debt recovery tribunal, business failure, economic slowdown, lack of demand, political pressures, government intervention in case of lending loans to priority sector etc. And internal factors like lack of credit appraisal system, managerial deficiency and lack of monitoring and follow up, use of inappropriate technology etc., which results in increase in Non-performing Asset s of public sector banks. This paper also explain what is the impact of Non-performing Assets on the working of public sector banks. The study is descriptive and analytical in nature. Various statistical tools like ratio analysis. Univariate analysis of variance, chi- square test, pie diagram, charts, table etc., to make the study more effective.