Determinants of Non-Performing Assets of State Bank of India and Other Selected Public Sector Banks in India

Abstract

State Bank of India, simply called as SBI, is the largest state-owned banking and financial services company in India. SBI provides a range of banking products through their vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). Non-performing assets (NPAs) are one of the major concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset. The NPAs growth involves the necessity of provisions, which reduces the overall profits and shareholders’ value. The problem of NPAs is not only affecting the banks but also the whole economy. In fact, high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade. Various steps have been taken by government to reduce the NPAs. It is highly impossible to have zero percentage NPAs. But at least SBI can try competing with foreign banks to maintain international standard. This paper is framed with the aim of analysing the sensitivity of the NPAs to bank-specific variables and country's macro-economic factors. An attempt is made to empirically evaluate how NPAs in SBI banks are influenced by their advancing pattern and macroeconomic factors in the country.