Non-performing Assets In Indian Banks Research Articles

Impact of Non-Performing Assets on Financial Health of Banks

The banking sector is a crucial financial service industry that supports development plans by channelling funds for productive purposes, facilitating the flow of funds from surplus to deficit units, and aiding in the implementation of government financial and economic policies. Banks fulfil social objectives through priority sector lending, extensive branch networks, and employment generation. Maintaining asset quality and profitability is essential for the survival and growth of banks. However, a significant challenge faced by the banking sector is the prevalence of Non-Performing Assets (NPAs). The Reserve Bank of India defines an NPA as “an asset, including a leased asset, that ceases to generate income for the bank.” Major causes of NPAs include wilful default, misuse of borrowed funds, and inadequate pre-loan inquiries. As of June 30, 2018, the Gross NPA of Indian banks was ₹10.03 lakh crores, with Public Sector Banks accounting for 88.74% of this total. The top five Public Sector Banks—SBI, PNB, IDBI, BOI, and BOB—make up 46.67% of the Gross NPAs. Private Sector Banks hold 11.26% of the total Gross NPAs, with leading banks being ICICI, AXIS, and HDFC. The primary aim of this paper is to examine the causes and effects of NPAs in the banking sector.

A STUDY ON EFFICIENCY OF MERGER AS A TOOL FOR FINANCIAL DISTRESS IN INDIAN PUBLIC SECTOR BANKS

Merger has become an efficient tool to cop up with financial difficulties in all the industries. In past few years Indian banking Industry is going through so many merger and the recent merger which has been taken place is of bank of Baroda, Dena Bank and Vijaya Bank. This study has been conducted to know the effectiveness of Merger to cope up which financial distress in these selected banks in terms of their Non-Performing Assets. The study has two objectives one is to understand the concept of Non-Performing Assets of Indian banks and second is to examine the impact of merger on financial performance of selected Indian public sector banks. For the analysis for factors i.e. Gross NPA, Net NPA, Percentage of Gross NPA, Percentage of Net NPA and Net Profit or Loss have been considered for the period of ten financial years which was divided into before and after merger period as the merger of selected banks was took place in 2019. The results of the study show that there is a significance difference between the before merger performance and after merger performance of the selected banks.

Sustainability of Financial Soundness of Banks: An Evidence Form Public and Private Sector Banks

The banking sector plays a vital role in the growth and development of the economy of any nation. Nowadays, NPAs are great challenges for banks and harm profitability, and financial soundness, and hinder the operational activities of the banks. The Non-Performing Assets (NPAs) refer to the loans and advances of which payment of interest or principal amount is delayed, or missed as per the bank’s schedule. The purpose of the study is to find out the comparative financial soundness of the leading Indian public and private banks to get the hedging factors against the NPAs. Possibly, the hedging factors against the NPAs will be helpful to control and reduce the level of NPAs in Indian banks. Financial ratios are the base to measure financial soundness. The graphical presentation and ANOVA (Analysis of Variance) were applied to get the comparative growth trend and disparity among the financial soundness measures of the leading Indian private and public sector banks. The analysis reveals that there is a significant difference in the financial soundness of leading Indian private and public sector banks. The NIM (net interest margin) of leading Indian public sectors is significantly different and the public banks with higher NIM utilize their profitability to write off their NPAs. Based on the study is advised to enhance the CASA (current account and saving account to total deposits) for hedging against NPAs and the profitability in public sector banks.

Critical Perspectives to Non-performing Assets of Indian Banks, Shrinking Balance Sheet, Challenges and Way Ahead

Indian banking sector is facing the problem of rising bad loans as gross non-performing assets (GNPA) of Indian banks is on continuous rise. The present study is an attempt to analyse rising bad loans scenario of Indian banks, various factors that contributes to non-performing assets (NPA), along with the present state of Indian banks. This study found that poor recovery measures, lack of proper credit and risk management system at bank level, wilful default by borrowers, lack of stringent regulation, poor level of corporate governance and misuse of funds by borrowers are the key factors behind the rising level of bad loans of Indian banks. It was found that public sector banks (PSB) are suffering the most from rising level of NPA, high rate of NPA of banks have adverse impact on banks’ balance sheets, their assets quality, increased provisioning coverage ratio of banks and low return on assets. Although various concerned stakeholders have taken numerous measures to curb the situation, such as recapitalization of PSB, construction of assets reconstruction companies (ARC), Debt Recovery Tribunals for speedy recovery of bad loans and enactment of insolvency and bankruptcy code (IBC),still there is much more to do, and have a huge scope to bring reforms in banking sector, especially in PSB of India.

Identifying Key Drivers of Non-Performing Assets in Indian Public Sector Banks: A Panel Data Analysis

The present study strives to identify the major factors influencing the non-performing assets (NPAs) of public sector banks (PSBs) in India using a panel dataset comprising of 26 PSBs over the period 1999-2000 to 2015-16. The results reveal that business per employee, operating inefficiency, priority sector lending, inflation and real interest rate have a significant positive influence on increasing NPAs of banks while credit orientation, higher capital adequacy, net interest margin, non-interest income, GDP growth, and financial intermediation are found to exert a significant favourable effect of lowering NPAs of banks. Most interestingly, the study also shows that the level of corruption and the rule of law significantly impacted the NPAs of Indian banks during the period under study.

Productive Efficiency and Non-performing Assets of Indian Banks in the Post-global Financial Crisis Period

This study endeavours to augment the existing literature on the productive efficiency of Indian domestic banks in the presence of non-performing assets (NPAs), by employing the Weighted Russell Directional Distance Model (WRDDM). Following the intermediation approach, the banking technology set includes three inputs, three desirable outputs and one undesirable output, namely NPAs. Due to their inherent technological heterogeneity, public sector banks (PSBs) and private banks (PVBs) have been analysed as separate groups. Balanced panels of 26 PSBs and 18 PVBs are constructed from 2010-2011 to 2016-2017. The results indicate a considerable scope of improvement in the productive performance of both categories of banks. The break-up of overall inefficiency into input- and output-specific components reveals some stimulating information. For PSBs, the inefficiencies primarily result due to physical capital, while for PVBs they emerge mainly from other incomes. However, NPAs are also a key contributor to inefficiency for both the categories of banks. The inefficiency scores also indicate that, across ownership categories, medium-sized banks are poorer performers than their smaller and larger counterparts.JEL: C14, C61, D24, G21

Non-performing assets in Indian Banks: An analytical study of selected public sector banks

Non-performing assets in Indian Banks: An analytical study of selected public sector banks

GROWTH OF NON-PERFORMING ASSETS OF INDIAN BANKS

GROWTH OF NON-PERFORMING ASSETS OF INDIAN BANKS

Impact Of Demonetization On The Economic Parameters That Affect The Growth Of Nonperforming Asset Of Indian Banks

The demonetization decision by the government of India affected almost all service sectors of Indian economy, out of which the banking sectors were affected the most. Due to demonetization bulk amount of old currency notes of INR 500 and INR 1000 were deposited to banks; that not only increased the capital base of banks, but those un-used cash boosted the liability of loan disbursement. Again the reducing interest rates, providing account opening facility and issuing loan to the depositors by banks without judging their repayment ability resulted a chance of increasing number of defaulters and the value of nonperforming assets. Considering the scenario the present research work tried to focus on the impact of demonetization towards the movement of nonperforming assets of Indian banks. A multivariate regression analysis was performed by considering income, expenditure and net profit ratio as internal and the percentage change of India’s GDP, inflation and foreign exchange rate as external independent variables towards the net nonperforming assets changes of Indian public and private sector banks as dependent variable from financial year 2016-17 to 2018-19. Though the outcome of the study revealed that demonetization helped to reduce the nonperforming asset values in short run but in long run it would stimulate the growth of nonperforming assets.

The Increasing Incidence of Non-Performing Assets of Indian Banks

The Increasing Incidence of Non-Performing Assets of Indian Banks

A Study of Non Performing Assets Management with Reference to Select Indian Public Sector Banks and Private Sector Banks

The asset quality of banks is one of the most important indicators of their financial health. It also reflects the effectiveness of banks’ credit risk management and the recovery environment. It is important that the signs of distress in all stressed accounts are detected early and those which are viable are also extended restructuring facilities expeditiously to preserve their economic value. (RBI/2012-13/208). The Indian banking sector has been facing severe problems of raising Non- Performing Assets (NPAs). The NPAs growth directly affects the profitability of banks. The problem of NPAs is not only affecting the banks but is affecting the economy as a whole. In fact high level of NPAs in Indian banks is nothing but a reflection of industry and trade. NPA do not generate any income, whereas, the bank is required to make provisions for such as assets. (Olekar and Talawar, 2012). NPAs do not just reflect badly in a bank‟s account books, they adversely impact the working of economy. There are many research conducted on the topic of Non- Performing Assets (NPA) Management, concerning particular bank, comparative study of public and private banks etc. In this paper the researcher is considering the aggregate data of select public sector and private sector banks and attempts to compare analyze and interpret the NPA management from the year 2010 -2015. On the conceptual side, it gives an overview of NPA, various types of NPA and its cause. The tools used in the study are Least square method and ANOVA. The findings reveals the percentage of Gross NPA to Gross advances is increasing for public banks, the Estimated Gross NPA for 2014-15 is also more in public banks as compared to private banks and from the ANOVA test, it is concluded Ratio of Gross NPA to Gross Advances for public sector and private Sector Banks does not have significant difference between 2010 to 2015.

Bank-specific determinants of nonperforming assets of Indian banks

The paper examines the role of bank-specific variables in explaining the dynamics of non-performing assets (NPAs) of Indian banks in a panel data framework over the post liberalisation period, 1995–2011. The results have been derived after controlling for macroeconomic factors like real GDP, inflation, exchange rate etc. Applying several variants of Generalized Method of Moments (GMM) technique in dynamic models, we find that that there is significant time persistence of NPAs in Indian banking system. We also find that larger banks are more prone to default than smaller banks. We find support for the ‘bad management hypothesis’ as we observe that an increase in profit level of the banks reduces NPAs in the next period. Lagged capital adequacy ratio as an important prudential indicator also significantly reduces current NPAs of banks. The paper also draws some important policy implications about NPA management.

Management of Non-Performing Assets in Indian Banks and its Challenges

Increase in non-performing assets has become a major area of concern for all stakeholders of Indian banking players. Provisioning requirements, consequent to higher non-performing assets and higher interest expenses have put pressure on the banks' profitability. The objectives of the study are to compare and contrast the performance of Indian banking sector with respect to its peer nations with specific emphasis to accumulation of NPA, to identify the causes of increase in NPAs in Indian banks and to recommend the necessary means through which NPA can be reduced to a significant extent. The research paper has taken into consideration the secondary data available in several research articles published in the different reputed national and international journals downloaded from EBSCO host and Emerald. Apart from these, different knowledge reports available in the public domain are also considered as the source of key information inputs. The paper will give a new dimension in the literature of NPA management after taking into account the guidelines of the Basel Committee on Banking Supervision to manage the credit risk. The focus of the research work is to identify the scope and direction of Indradhanush framework, an innovative initiative by the Ministry of Finance, Government of India to combat against the curse of NPA. The paper analyses the impact of recapitalization of Indian banks and puts a major impetus on knock out ratio to judge the financial health of the banks.

A Cyclical Structure on Non-Performing Assets of Scheduled Commercial Banks in India

The Indian banking sector is facing a serious problem of NPA. The magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled. NPAs have been fighting cyclical movement or dieses on week patient and it is an underdevelopment feature like chronic poverty. This paper deals with understanding the concept of NPAs, its magnitude and major causes for an account becoming non-performing and strategies for managing NPA in Indian banks. The best indicator for the health of the banking industry in a country is its level of Non-performing assets (NPAs). NPAs are one of the major concerns for banks in India. It reflects the performance of banks. Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of provisions, which bring down the overalls profitability of banks.

Determinants of Non-Performing Assets in India - Panel Regression

It is well known that level of banks‟ credit plays an important role in economic developments. Indian banking sector has played a seminal role in supporting economic growth in India. Recently, Indian banks are experiencing consistent increase in non-performing assets (NPA). In this perspective, this paper investigates the trends in NPA in Indian banks and its determinants. The panel regressions, fixed effect allows evaluating the impact of selected macroeconomic variables on the NPA. The Panel regression result indicates that the GDP growth, change in exchange rate and global volatility have major effects on the NPA level of Indian banking sector.

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

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.

Dynamics of emerging India's banking sector assets: A simple model

Banking sector loans are the principal source of capital for small and medium business ventures in India, comprising firms that are not large enough to be registered with stock exchanges. Non-performing assets (NPAs) are an important measure of the success of these businesses, as well as of their levels of discretion in carrying out their commercial activities conditional on their role in developing India's entrepreneurship outside the stock markets. In this article we analyze certain properties of NPAs in Indian Banks over the 1990s, when liberalization was introduced by opening up a significant portion of the public sector, allowing private banks to do business. We arrive at three conclusions for emerging India's banking sector. First, NPAs (as a ratio of loans and advances) are significantly sticky over time. Second, larger NPAs are associated with larger advances and vice-versa. Third, NPAs do not seem to have spiraled out of control over the 1990s. A simple cointegration test is carried out and a set of dynamic graphs, using notions of ‘fibration’, is presented to support the results.