Management of Non Performing Assets in Indian Banking System
Management of non-performing assets is the most important factor for the basic viability of the banking system. The Indian banking system has been facing the serious problems of the rising NPAs. In fact, PSBs are facing more problems than the private sector banks. The NPAs in PSBs are growing due to external as well as internal factors. Managing the NPAs has emerged as one of the major challenges facing banks today as high level of NPAs affects core performance area of the banking system as well as raises corporate governance issues.
The asset quality of banks is an important indicator of their financial health which also reflects the efficacy of their credit risk management and recovery environment. Rising NPAs are not just hurting banks' profitability but are also reducing the amount of funds available for fresh lending as banks need to make higher provisioning for bad debts. In an attempt to study the management of NPAs in Indian banking system, this study discussed conceptual framework of NPAs and analysed the trends of NPAs in PSBs, private sector banks and foreign banks. It was observed that containing NPAs has been in focus since the Indian banking sector reforms were initiated in 1992. The banks have been making efforts to contain the NPA level. Even, RBI has also tried to develop many schemes and tools to reduce the NPAs.
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