A Study on Analysis of Non-Performing Assets and its Impact on Profitability: In The Context of Indian Banking System

Abstract

The banking industry plays a critical role in the Indian economy. Measuring and maintaining the asset quality
of banks is important for the development of the banking sector. Nowadays, the asset quality in banks, especially
the Public Sector Banks is constantly deteriorating and thus causing intolerable stress to the banking sector,
regulators, and Indian economy. The objective of the present study is to understand the level of Non-performing
Assets (NPA), and how it influences the profitability of the banks.Non-performing Asset is one of the prevalent
problems of Indian Banking sector. For the past three decades, the banking system has several outstanding
achievements to its credit. Many banks are facing the problem of NPAs which hampers the business of the
banks. Non-performing assets are a drain to the banks. Various research studies have been conducted to
analyze the root causes of NPA. The following study tries to understand the concept of NPA, its causes and
impact on profitability. The problem of NPA impacts profitability, Liquidity and results in credit loss. Unless
and otherwise proper remedial measures are taken the quantum of nonperforming assets cannot be reduced and
the bank will incur losses to a great extent.

KEYWORDS:NPA, Bank, Profitability, Lending, ROI, Global, Economy