Non Performing Assets Research Paper

Non Performing Assets Research Paper-80
Risk management in banking industry has became an important issue since the 2009 global financial crisis (Joel) [1] .Overview of Indian Banking Industry The present Indian banking structure comprises 84 scheduled commercial banks (SCBs) consisting of 21 public sector banks (PSBs), 20 private sector banks (PVBs) and 43 foreign banks (FBs).These banks account for 98 per cent of the banking business in India [2] .

Risk management in banking industry has became an important issue since the 2009 global financial crisis (Joel) [1] .Overview of Indian Banking Industry The present Indian banking structure comprises 84 scheduled commercial banks (SCBs) consisting of 21 public sector banks (PSBs), 20 private sector banks (PVBs) and 43 foreign banks (FBs).These banks account for 98 per cent of the banking business in India [2] .

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The study suggests that PSBs have adopted liberal and loose credit policies, and have concentrated loans on borrowers and sectors, i.e., huge credit exposures to a few large corporate borrowers and to a few sectors.

It also finds that PSBs are subject to weak and mild regulatory and supervisory impacts on their operations and functions as these are owned by the Government of India.

The government has to introduce flexible compensation package and incentives to the managements of PSBs linked to the performance so that it will improve profitability and reduce NPAs.

The Reserve Bank of India’s regulation and supervision should be ownership neutral.

Keywords: Credit Risk Management, Public Sector Banks, Non-Performing Assets1.

Introduction The profitability and performance of banking institutions depend upon the efficient credit function of banks.In this connection bank must aware of the problems and recovery legislations of NPAs.Compared to Private Sector Banks and Foreign banks, Public Sector Banks (PSBs) are highly affected by this three letter virus NPA, because whose objectives have been more social than economic.Credit and credit risk managements are important functions of the bank.The nature of ownership, credit management or style of management or principles and practices of baking business are influencing and determining the NPAs in scheduled commercial banks (SCB) in general and public sector banks (PSB) in particular.Finance & Accounting, ICFAI Business School (IBS), IFHE, Hyderabad, India Copyright © 2019 by author(s) and Scientific Research Publishing Inc.This work is licensed under the Creative Commons Attribution International License (CC BY 4.0). December 29, 2018; Accepted: January 26, 2019; Published: January 29, 2019 ABSTRACTThe paper identifies why there are more non-performing assets (NPAs) in the public sector banks (PSBs) than those in the private sector banks (PVSBs).Commercial bank credit as percent of GDP picked up steadily from 24 per cent in 2001 to 55 percent by 2017 [2] .The ratio of bank deposits also grew from 44 per cent to 68 per cent during the same period.It evaluates and reviews the policies and practices of scheduled commercial banks (SCBs) in terms of NPA management.It studies the causes of NPAs, such as ownership structure, credit terms, conditions and covenants, nature of loans, kind of borrowers, bank management practices and business cycles.

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