A Study on Impact of NPA’s on Banks Profitability (Case on Selected Banks) 1991-2019

Abstract

Non-performing Asset is a vital factor in the examination of financial performance of a bank. Non Performing Asset is the key term for the banking corporations. Non Performing Assets show the competence of the performance of the banks. Non Performing Assets means which amount is not received by the bank in return of loans disbursed. Non Performing Assets affect not only the finance institution but the total financial system. Thus a selective study has been done on public sector banks in India to evaluate the effect of Non Performing Assets on the profitability of banks. Banks today are not judged only on the basis of number of branches and volume of deposits but also on the basis of standard of assets. NPAs negatively affect on the profitability, liquidity and solvency of the banks so in this paper we have worked out to find the impact on NPA to primary sector lending impact on the Profitability of the bank.

Banks in India have changed a lot over the course of time along with that the system have changed as well. The accounting and managing the accounts have taken a big leap. With these change the risk of default has increased significantly as well, now banks around the globe are exposed to much higher risk then they are in past. This paper show the impact on NPA’s with change in different element as return on asset, net total asset and net profit. Regression analysis of the data show promising result about the analysis this show that with rise in NPA’s there is rise in other factor as well.

Banking companies were exposed to different risks while doing there core business, especially while lending loans. Which lead to increase in NPA’s. NPA’s is a huge problem for a developing country like India.

Keywords: NPA, banking, public, private, indian, economy

JEL Classification: G21