A study on determinants influencing surge in NPAs: Special reference to IDBI Bank

Abstract

A secure and strong banking sector is essential for a constant growth of economy. The major hurdle faced by a majority of Scheduled Commercial Banks in India at present is a surge in Non-performing Assets (NPAs). The surge in NPAs is threatening the profitability of banks and the economy as a whole. Low profitability of a bank has a spiraling effect viz., lower Credit Rating of the Bank results in reduced Earnings Per Share (EPS), low or no dividends impacting International Business transactions, bank borrowings and discouraging investors. Hence it is the need of the hour and absolute necessity to contain / tackle NPAs for better economic conditions and future of the nation. The objective of this paper is to analyze the causes for increase of NPAs. Data were collected among 371 employees of IDBI Bank and factors influencing surge in NPAs are ranked with the aid of Garrett Ranking method. Thus, in order to maximize profitability, banks have to ensure that NPAs are reduced and contained effectively.