To What Extent Are Non Performing Assets Affecting the Profitability of Co-Operative Banks in Maharashtra?

Abstract

An important role is played by the cooperative institutions, comprised of Urban Co-operative Banks (UCBs) and rural cooperative credit societies in the delivery of the banking needs to small and medium income groups who are unable to get the banking facilities from the commercial banks. For flourishing economy a strong banking sector is important. An increase in NPA put a significant impact on the profitability of the bank because banks compensate these losses from its profit. As per the Financial Stability Report June 2018, 'the stress in the banking sector continues as gross non-performing advances (GNPA) ratio rises further'. The rural sector of India has the largest contribution to the GDP of the country and the contribution of the rural population are considerably high. The cooperative banks are more active in the rural areas of India. Increasing NPA in the Co-operative banks has an adverse effect on the rural economy. The problem of NPAs are affecting the banks as well as the whole economy. This study deals with understanding the extent to which NPAs are affecting the profitability of Co-operative banks in Maharashtra.

Keywords: Co-operative banks, Non performing Loans, Return on Assets, Bank Capital

JEL Classification: G21