Management of non-performing assets in India: role of risk management practices in the wake of Covid-19

Abstract

The purpose of the present study is to analyse the impact of banks’ internal practices for risk management, Basel III regulations, Insolvency and Bankruptcy Code (IBC), 2016, and the Covid-19 pandemic on the outcome received in reference to NPA management. The study has worked on primary data collected from the final sample of 111 managerial employees working in domestic commercial banks of India, using a structured questionnaire. For analysing the collected data, statistical tools of exploratory factor analysis (EFA) and structural equation modelling (SEM) comprising of confirmatory factor analysis (CFA) and path analysis, have been used. The results indicate that the banks’ internal practices for risk management, regulatory standards and IBC, 2016 are beneficial for the asset quality of banks. On the contrary, emergence and rapid spread of Covid-19 has made the situation of NPA worse and has halted the progress made in NPA management.