Effect of Non-Performing Assets on Operational Efficiency of Central Co-Operative Banks

Abstract

Credit risk stands out as the most detrimental risk to which Banking business is exposed to. Co-operative banks which have proved to be vessels of rural development and financial inclusion, have been susceptible to credit risk throughout their history. The Prudential Norms of Income Recognition and Asset Classification were implemented for Co-operative Banks in India in 1996-1997 in order to strengthen them and improve their quality. Non-performing Assets (NPA) in the loan portfolio affect the operational efficiency which in turn influences profitability, liquidity and solvency position of co-operative banks. This is a theoretical analysis of the effect of Non-performing Assets on the Operational Efficiency of Central Co-operative Banks.

Keywords: Co-operative Banks, Non-performing Assets (NPA), Operational Efficiency, Profitability, Liquidity, Solvency, Credit risk

JEL Classification: G21, G32, E44, E51, M21, O16