A Study on Non Performing Assets
International Journal of Business and Management Tomorrow
Vol. 2 No. 3
A Study on the Performance of Non-Performing Assets (NPAs) of Indian Banking During Post Millennium Period
Siraj. K.K*, Research Scholar, School of Management Studies, CUSAT, Cochin Prof. (Dr). P. Sudarsanan Pillai, Research Guide, School of Management Studies, CUSAT, Cochin
Abstract
NPA is a virus affecting banking sector. It affects liquidity and profitability, in addition posing threat on quality of asset and survival of banks. This study explored movement of various NPA indicators; Gross NPA, Net NPA, Additions to NPA, Reductions to NPA and Provisions towards NPA and compare it with Total Advances and Total Deposits of banks. The study utilized bank-group wise performance statistics for post-millennium period up to the period ended 31st December 2011. The study utilized growth rate calculating using AAG rate, correlation and regression study to analyze the movement and significance of NPA indicators during the period. The effect global financial crisis on the NPA indicators as well is explained. The study concluded that NPA still remains a major threat and the incremental component explained through additions to NPA poses a great question mark on efficiency of credit risk management of banks in India. Keywords: Gross NPA, Net NPA, Additions to NPA, Total Advances, Total Deposits, AAG Rate.
1. Introduction
The economic progress of a nation and development of banking is invariably interrelated. The Banking sector is an indispensable financial service sector supporting development plans through channelizing funds for productive purpose, intermediating flow of funds from surplus to deficit units and supporting financial and economic policies of government. The importance of bank’s stability in a developing economy is noteworthy as any distress affects the development plans (Rajaraman and Vasishtha, 2002) thereby the economic progress (Thiagarajan, et al, 2011). The Indian Banking sector
Vol. 2 No. 3
A Study on the Performance of Non-Performing Assets (NPAs) of Indian Banking During Post Millennium Period
Siraj. K.K*, Research Scholar, School of Management Studies, CUSAT, Cochin Prof. (Dr). P. Sudarsanan Pillai, Research Guide, School of Management Studies, CUSAT, Cochin
Abstract
NPA is a virus affecting banking sector. It affects liquidity and profitability, in addition posing threat on quality of asset and survival of banks. This study explored movement of various NPA indicators; Gross NPA, Net NPA, Additions to NPA, Reductions to NPA and Provisions towards NPA and compare it with Total Advances and Total Deposits of banks. The study utilized bank-group wise performance statistics for post-millennium period up to the period ended 31st December 2011. The study utilized growth rate calculating using AAG rate, correlation and regression study to analyze the movement and significance of NPA indicators during the period. The effect global financial crisis on the NPA indicators as well is explained. The study concluded that NPA still remains a major threat and the incremental component explained through additions to NPA poses a great question mark on efficiency of credit risk management of banks in India. Keywords: Gross NPA, Net NPA, Additions to NPA, Total Advances, Total Deposits, AAG Rate.
1. Introduction
The economic progress of a nation and development of banking is invariably interrelated. The Banking sector is an indispensable financial service sector supporting development plans through channelizing funds for productive purpose, intermediating flow of funds from surplus to deficit units and supporting financial and economic policies of government. The importance of bank’s stability in a developing economy is noteworthy as any distress affects the development plans (Rajaraman and Vasishtha, 2002) thereby the economic progress (Thiagarajan, et al, 2011). The Indian Banking sector