Total Quality Management and Assets Quality

Abstract

The present study aims to examine the relationship between assets quality of banks as represented by non-performing assets (NPA) and management quality. The study has used Fama-MacBeth regression approach to measure management quality, which has been considered as the primary determinant of NPA. A sample comprising of 45 scheduled commercial banks in India has been studied for a time period of 15 years (2004-2019). The findings have revealed that better quality management leads to better asset quality. Banks with above average managerial ability can reduce NPA significantly. The bank managers should focus on their role in controlling problem loans of banks and should implement more efficient monitoring and supervision process for loan portfolios. The policy makers should pay attention towards the managerial ability of banks and stress on enhancing the quality of management. Also, investors may take note of the banks that are showing good management quality because such banks can be a profitable investment avenue.