Methodology to Predict NPA in Indian Banking System

Gourav Vallabh,Ruchir Prasoon,Abhimanyu Singh,Digvijay Singh

doi:10.4236/tel.2016.64087

Abstract

Banking sector is the backbone of any economy and plays a pivotal role in the development of the nation. With the ever increasing need of involvement of banks in the economic growth process, the issue of non-Performing Assets (NPAs) has assumed mammoth proportions. Subsequently, as government in emerging countries pushes for financial inclusion, the risk associated with bank assets increases. With this background, this paper analyses problem of non-Performing Assets (NPAs) in Indian banking system. The authors have devised a unique way to forecast the NPAs in Indian banking system in 2020. The focus was to devise a model which would play a pivotal role in forecasting future NPAs in the Indian banking sector. This was achieved by looking into various methodologies and zeroing in on a model, which could be implemented to help understand how NPAs could be predicted.

Highlights

Banking sector is one of the most crucial aspects of an economy and it is high time the Indian banking sector starts to deliver the goods
MLR Analysis (Linear, Stepwise and Logarithmic) and Results for Overall Banking Sector In Multiple Linear Regression we have used a combination of independent variables (CPI, GDP, Repo Rate, Loans and Advances) for finding out their relationship with the non-Performing Assets (NPAs)
We explored the possibility of a nonlinear relationship between NPA and the variables identified from stepwise regression

Summary

Introduction

Banking sector is one of the most crucial aspects of an economy and it is high time the Indian banking sector starts to deliver the goods. Myriad schemes like Jan Dhan, Make in India, Direct benefit transfer require the Indian Banking sector to expand its spectrum of services and widen its capabilities to cater to larger masses. The necessity of it can be understood by the fact that India’s vision is to provide banking services to even its remotest geographical area and to accommodate people belonging to both ends of the spectrum. The perennial problem of NPA will be the biggest issue to tackle as far as expansion is concerned. (2016) Methodology to Predict NPA in Indian Banking System.

Objectives

Methods

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Conclusion