Non-Performing Assets: Reasons, Consequences and Corrective Actions

Abstract

This study examined the reasons of rising Non-Performing Assets (NPAs) and investigated the consequences of inflating NPAs on the bank performance of Indian Banks. It also analyzed how the corrective actions initiated by government helped in controlling the rising NPAs. It also analyzed how the NPAs were recovered through various recovery channels in Indian Scheduled Commercial Banks. It also examined the restructuring of NPAs in Public Sector Banks, Private Sector Banks and Foreign Banks of India. The period of the research is 2012-13 to 2016-17. Time series analysis was employed. The findings confirmed that profitability of banks decreased and financial growth of the country was hindered with rising NPAs. It was also confirmed that SARFAESI Act was the more effective NPA recovery channel than Lok Adalats and DRTs in Indian Scheduled Commercial Banks. It was also found that restructuring of NPAs was highest in Public Sector Banks and lowest in Foreign Banks of India.