Non-performing Assets Of Banks Research Articles

Non-performing Assets (NPA) Dynamics in Emerging Markets: A Comparison Between India and China

Non-performing assets (NPAs) are a serious concern for banks, and they serve as a key measure of profit. Elevated levels of NPAs suggest a higher chance of credit bankruptcy, which harms banks' profitability and net worth while also reducing the value of their assets. This review provides a thorough investigation of NPAs in emerging countries, with a particular emphasis on a comparative analysis of regulatory methods in India and China. It seeks to clarify the significance of NPAs in emerging market economies by examining their role as indices of financial health, drivers of systemic concerns, and impediments to effective monetary policy. The study elucidates the performance of NPAs in banks in India and China. Additionally, the study identifies the economic, political, institutional, and social factors governing NPAs in these countries. Lastly, the study supports controlling NPAs rather than simply eliminating them, especially considering the higher inflation rates and bank margins found in these countries.

Non-Performing Assets in Public and Private Sector Banks in India: A Comparative Study

In emerging economies, banks are not only working as agents of financial intermediation but also having additional responsibilities to achieve social agenda of government. They are working as lubricant for the wheels of economy by providing financial help to the needy sectors. This financial help is providing by them via granting loans to all these sectors of economy. But the problem of rising non-performing assets (NPAs) is becoming hurdle in smooth functioning of banks which is also impacts on the growth and development of economy. The entire banking system in India is suffering from this problem of rising non-performing assets which is not good for bank’s progress. Because in case, if banks are not able to recover the amount lent to their borrowers, the level of their profits come down which will adversely affect the financial health of banks. This problem of increasing NPAs is not only faced by Public Sector Banks (PSBs) but also by the Private Sector Banks in India. This paper focuses on the level of non-performing assets in Public and Private sector Banks in India and also tries to give suggestions to reduce NPAs in banks.

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.

Impact of macroeconomic variables on the performance of stock exchange: a systematic review

PurposeThis paper aims to identify various macroeconomic variables that affect the stock market performance of developed and emerging economies. It also investigates the effect of these factors on the stock markets of both economies. The impact of these variables on broad market indices and sectoral indices is investigated and compared too.Design/methodology/approachThe publications for the study were retrieved from databases such as Emerald Insight, EBSCO, ScienceDirect and JSTOR using the keywords “Macroeconomic variables” and “Stock market” or “Stock market performance.” The result demonstrated a growing corpus of scholarly work in the domain of stock market. The study was carried out separately for each macroeconomic indicator. Given a large number of articles under consideration, the authors began by reading the titles and abstracts of all publications to identify those that were relevant. The papers are evaluated in Excel and the articles for review range from 1972 to 2021.FindingsThe authors found that gross domestic product (GDP), FDI (Foreign Direct Investment) and FII (Foreign Institutional Investment) have a positive effect on both emerging and developed economies’ stock market while gold price has a negative effect. Interest rates had a negative impact on both economies except for a few developing countries. The relationship with oil prices was positive for oil exporting countries while negative for oil importing countries. Inflation, money supply and GDP are the macroeconomic variables that have the same effect on sectoral indices as they do on broad market indices. The impact was sector-specific for the remaining variables.Research limitations/implicationsThis paper gives an overview of relation and effect covering variety of macroeconomic variables and stock market indices. Still, there is a scope for further research to analyze the effect on thematic, strategy and sectoral indices. A longer time horizon with new variables, such as bank deposit growth rate, nonperforming assets of banks, consumer confidence index and investor sentiment, can be studied using high-frequency data. This research may help stakeholders adopt and manage their policies during a crisis or economic slump.Practical implicationsThis study will assist investors, researchers and educators in the fields of economics and finance in understanding how macroeconomic factors affect the stock market. Furthermore, this study can guide in portfolio diversification strategy across multiple sectors by examining the impact of macroeconomic factors specific to sectoral indices. This paper provides insight into society and researchers since it integrates a number of macroeconomic variables and their interaction with the stock market. It may also help pension funds and mutual fund firms to hedge their funds and allocate equity portfolios.Originality/valueWith respect to India, this study looked at new macroeconomic variables and sectors. It contrasted the impact of these variables in developed and developing economies. The effect of broad and sectoral stock indexes was also investigated and compared. The authors examined how these variables responded during crisis and economic downturns by using articles from a longer time frame. This research also looked into how changing the frequency of data for the variables altered stock performance. This paper emphasized the need for more research into thematic, strategy and broad market indices, such as small-cap and mid-cap indices.

A Systematic Review on Non-Performing Assets in Banks in India

Lending is a cruttial part of financial sector that is Banks/NBFCs in India. It is main revenue génération business of Bank/NBFCs. Financial Institution i.e. Bank and NBFCs used to borrow funds from the market i.e. from other institution & public and then lend the same again to its clients to gain profits to its owners/investors. There were 27 Public Sector Banks in India (Incl. SBI Associates Banks) before announcement of merger of some Banks by Union Govt. Of India in the year 2019 and there are multiple other Pvt. Sector Banks and NBFCs, co-operative bank and regional rurul bank which we studied in this paper. Lending business of the Banks/NBFCs is facing slowdown in recent years. Non-Performing Assets are increasing day by day which is creating big problem not only to financial sector i.e. Bank/NBFCs but also for other industries. In this paper we will systemtically review the literature/artiles already pubilshed on NPAs in India and to know the main reasons and factor which are resposible for rising NPA in financial institutions and to find out scope of further research on this topic.

A Research on Nonperforming Assets of Banks in India

Accepting deposits and lending loans is the primary function of banks. They lend loans on certain terms and conditions. Some of the granted loans may be continuously, periodically and systematically repaid by the borrowers as per the agreed terms and conditions but may not be repaid in time and there may be time lag in repayment. Sometimes the time lag may become longer and irrecoverable. The loan granted by the bank is asset to the bank as it is receivable amount to bank. If the loan is being systematically repaid by the borrower, it is performing asset, otherwise if it is not being paid regularly and properly it is said to be non performing asset. If payments of interest and/ or principal are in default for more than 90 days period, generally it is considered as non-performing asset. Nonperforming assets are burden to banks. They adversely affect the performance of banks and sometimes increasing non-performing assets may lead to closure of business also. These should be regularly reviewed, monitored, analysed and ultimately controlled for the smooth running of bank. For this a systematic regulatory mechanism must be employed and ensured its perfect execution. In this paper an attempt has been made to make study on Non-Performing assets of banks in various sectors in India by using percentages, Indexed values. The study is completely based on secondary data collected from handbook of statistics of Reserve Bank of India. The collected data is tabulated, analysed and conclusions are drawn.

NPAs in Indian Scheduled Commercial Banks: Origination and Impact on Economy

Mounting non-performing assets (NPAs) in the Indian banking sector has been drawing the attention of policymakers, economists, academicians, and other stakeholders. More particularly, during the last ten years, the rise in NPAs of banks has sent the alarming bell both to the Reserve Bank of India and the Government. Per a few studies, one of the root cause for the huge and gigantic rise in NPAs is the 2008 global financial crisis besides lending to Priority sector. The necessity of provisions and high funding costs has also caused an increase in NPAs while bringing down the profitability of banks. Hence, the consequent impact of NPA includes poor recycling of funds due to the weak deployment of credit which potentially could thwart the financial soundness of the credit system. Higher NPAs not only shakes the confidence of investors, depositors, lenders, etc., but also imperil liquidity, solvency position, profitability, capital adequacy ratio, and so on. A few measures that are required for management of NPAs like the establishment of monitoring department, reformulation of banks’ credit appraisal techniques, among others. The paper examines the trends of NPAs and the factors responsible for mounting NPAs in the banking sector from non-identical aspects. The use of secondary sources of data from authentic websites of RBI, Finance Ministry, and Banks has been made.

Good Governance and NPA’s of Priority and Non-Priority Sectors of Public Banks in India

The purpose of the study is to examine the Impact of NPA’s on Profitability of Public Sector banks in India. Facilitating loan and advances to customers is the main stream of banking business. The loans are advanced by banking institution to different segment of their market. These segments primarily fall under priority and non-priority sectors, in former sector bank are directed to grant as per guidelines by the Reserve Bank of India. Furthermore, the rise of non-performing assets in banks is influenced by many reasons depending upon the quality of bank’s assets in both of these sectors. The study also explores that corporate governance is one of the important remedy for the rise of such non-performing assets which plays a significant role in banks themselves getting bankrupt. Changes required to tackle the NPA problem would have to span the entire gamut of judiciary, polity and the bureaucracy to be truly effect ive. This area needs to be worked out a s financial sector i.e bank play a prominent role in development of an economy.

Non-performing assets of banks and economicgrowth vinculum in the era of globalization: The Indian experience

The introduction of the New Economic Policy (NEP) in 1991 by the Government of India (GoI) made it very clear that the viability of commercial banks is conditioned on their ability to make profits. In a globalized world, the whims and fancies of business cycles govern the fate of banks and a recessionary phase hampers the bank’s ability to pile on the profits thereby increasing their stock of non-performing assets. India, recently, is placed in a very bizarre situation, — some of the renowned banks are reporting huge losses but there is a very limited impact on stock markets. Strategically, the government, however, has taken corrective measures to arrest the growth of non-performing assets (NPAs) of banks. This paper builds upon a time series model capturing the position of NPAs of banks in India (excluding foreign banks operating in India). Empirically, there is a uni-directional causal relationship running from NPAs of banks to growth. Theoretically, what we can conclude is that imposing strict lending norms on banks actually manifests itself into a deeper recession, lowers growth and in turn aggravates the NPA problem further.

A hierarchical model of the determinants of non-performing assets in banks: an ISM and MICMAC approach

ABSTRACTThe banking systems of emerging economies in general and India in particular are facing sustained impairment due to mounting non-performing assets (NPAs). In the absence of stringent policies and their implementation, the results will be detrimental and may eventually lead to an economic crisis. Thus, it is imperative to unearth the causal factors and mitigate the risks involved with rising NPAs. The study attempts to identify the determinants of NPAs from the existing literature and subsequently, explore the interlinkages between the identified factors. A model of these factors is developed using Interpretive Structural Modeling (ISM) and MICMAC approach. Key managerial insights were obtained by the suggested model, specific to the Indian context. The hierarchical model provides a clearer perspective about the relationship between the factors and suggests that economic conditions and political factors are the key drivers which impact the ownership pattern and adherence to the regulatory framework; these further impact the internal factors related to the banks and borrowers’ capacity to repay. The study will act as a scaffolding for policymakers and bankers. Based on these findings, better instruments and mechanisms for recovery/management of NPAs can be put in place.

Identifying Effective Factors on Nonperforming Loans and its Reduction in the Sixth Development Plan

If the borrower, refuses to returning all or part of the loan, unreturned amount, is called nonperforming assets. Nonperforming assets of the banks is the result of the economic conditions and high levels of inflation and reflects poor performance banks in the management of resources and expenditure.Inceasing the nonperforming assets of banks, will bring decreasing banks facilities, inflation and the underground economy. In this study, to reduce the nonperforming assets of banks in the sixth development plan, for instance, factors affecting nonperforming assets of Melli banks of Markazi Province will be investigated. Independent variables impact ,the number of warnings, time of the facilities repayment, amount of credit facilities, interest and inflation rates and dummy variables of collateral, bank supervision and education of borrowers on dependent variable (the amount of nonperforming assets) between the years 1368 to 1388 were investigated using SPSS and by OLS method . Among the above variables , time of the facilities repayment and amount of credit facilities have positive and significant effect on nonperforming assets of Melli Banks and it means the nonperforming assets will increase by its increase. DOI: 10.5901/mjss.2016.v7n4S2p223

Low RWA but high GNPA? Risk performance of some Indian banks under Basel II-SA

Indian banks have moved toward a more stringent regime of risk management with the implementation of Basel II guidelines under the standardised approach. While banks may have benefited from the increasing sensitivity to risk, there have also been challenges for interpreting their risk performance. It has been observed that some banks report lower risk, measured as riskweighted asset density, for their portfolios and yet have higher gross non-performing assets than others. Such an observation raises the question as to how the implementation of Basel II guidelines would lead to improvements in the risk performance of banks. The study reviews the structure of the Basel II risk weightings and determinants of the risk-weighted and gross non-performing assets of banks, before analysing the empirical data of 20 banks in India for the period 2009–2010 to 2013–2014. It has been found that the business mix of banks, their client portfolios and lending orientation strongly determine the risk of their asset portfolios, but not their default performance. While the structure of the Basel II standardised approach may provide a certain flexibility to banks to project the riskiness of their assets, the default performance may be determined by other factors such as conditions in the macro-economic environment and capabilities for credit and nonperforming asset management.

Management of Non-Performing Assets in Indian Public Sector Banks: A Critical Analysis

Non-Performing assets (NPAs) in the Indian Banking system have assumed astronomical dimensions through the introduction of the concept of asset classification, income recognition and provisioning norms by Reserve Bank of India to assess the credit risk of a bank. High level of NPAs in banks has attracted public as well as foreign financial institution to analyse the reasons for it. In this paper, an attempt has been made to find out the various factors responsible for the huge NPAs. Further the different characteristics of NPAs on the basis of industry have been analysed.