top of page

ANALYZING THE IMPACT OF DISTRESSED ASSETS ON BANKING: A DESCRIPTIVE AND ANALYTICAL EXPLICATION

Author - 

Dr. Nikhat Fatima

Dr. Aliza Haider

Abstract

A sound and healthy banking system is an indication of a stable economy. If the banking sector
becomes vulnerable, it will have a devastating impact on the functioning of other sectors and
eventually affects the growth of the country. Bad loans have disastrous impact on the operations
of banks as they result in huge amount of losses. Non-Performing Assets (NPAs) act as a termite
for the banking system as they gradually eat good assets by creating provisions and make banks
hollow from inside. The present study is descriptive and empirical in nature analyzing the impact
of NPA on banking operations of banks particularly on profitability of the Scheduled
Commercial Banks (SCBs) for the period ranging from 2010 to 2020. The study revealed that
NPAs have a catastrophic impact on profitability, productivity, liquidity, solvency, credibility,
and competitive functioning of banks. High level of NPAs has a catastrophic impact on net profit
of banks. The study also found that there is significant negative correlation between NPAs and
net profit of SCBs. If NPAs level will not brought down upto a manageable limit, they will pose
serious threat for banks survival, growth, and expansion.

 


Keywords: NPAs, banking, SCBs, profitability

​

​

References

  • Ainapur, J. (2014). Comparative analysis of NPA of old private sector banks in India.International Journal of Public Administration & Management Research, 2(1), 106-115.

  • Agarwala, Varun., & Agarwala, N. (2019). A critical review of non-performing assets in theIndian banking industry. Rajagiri Management Journal, 13 (2), 12-23.Doi:10.1108/RAMJ-08-2019-0010

  • Balasubramaniam, C.S. (n.d.). Non-performing assets and profitability of commercial banks inIndia: Assessment and emerging issues. ABHINAV National MonthlyRefereed Journal ofResearch In Commerce & Management, 1(7), 41-52.

  • Bansal, A. (2012).A study on recent trends in risk management of non-performing assets bypublic sector banks in India. Journal of Information and Operations Management, 3(1),50–56.

  • Batra, S. (2003). Developing the Asian markets for non-performing assets: Developments inIndia, 53-83. Proceedings from the Third Forum for Asian Insolvency Reform . Retrievedfrom https://www.oecd.org/daf/ca/corporategovernanceprinciples/33962292.pdf

  • Chatterjee, C., Mukherjee, J., & Das, R. (2012).Management of non performing assets - Acurrent scenario.IRJC International Journal of Social Science &InterdisciplinaryResearch, 1 (11), 204-214.

  • Chimkono, E.E., Muturi, W., &Njeru, A. (2016).Effect of non-performing loans andother factorson performance of commercial banks in Malawi.International Journalof Economics,Commerce and Management, 4 (2), 549-563. 

  • Dubule, U.S. (2009). Management of non performing assets with special reference to holdingcost and profitability (Doctoral thesis). Retrieved fromhttp://shodhganga.inflibnet.ac.in/handle/10603/4351

  • Explanatory Notes for Statistical Tables Relating to Banks in India, 2015. Retrieved fromhttps://rbi.org.in

  • Gopalakrishnan, T.V. (2004). Management of non-performing advances.New Delhi, India:Northern Book Centre.

  • Grewal (2010).Problem of NPA and its impact on banks: with special reference to State Bank ofIndia (Research Project). Retrieved from https://www.scribd.com/doc/36883180/NonPerforming-Assets-in-SBI-Group

  • Hafsal, K., Suvvari, A., & Durai, S.R.S. (2020). Efficiency of Indian banks with non-performingassets: evidence from two-stage network DEA. Future Business Journal, 6 (1).Doi:https://doi.org/10.1186/s43093-020-00030-z

  • Jain, V. (2007).Non-performing assets in commercial banks.New Delhi, India: RegalPublications.

  • Joseph, A. L., & Prakash, M. (2014).A study on analyzing the trend of NPA level in privatesector banks and public sector banks.International Journal of Scientificand ResearchPublications, 4(7), 1–9.

  • Karunakar, M., Vasuki, K., & Saravanan, S. (2008). Are non-performing assets gloomy orgreedy from Indian perspectives? Research Journal of Social Sciences, 3, 4–12.

  • Krishna, G.R., & Rao, K.V.G. (2008).Performance of public sector banks after reforms.NewDelhi, India: Serials Publications.

  • Madapana, K., & Mohanty, D. (2014).A study on non- performing assets with reference tobanking sector.International Journal of Research, 1(6), 401–411.

  • Mishra, U.M., &Pawaskar, J.R. (2017).A study of non-performing assets and its impact onbanking sector. Journal of Research, 3(1). Retrieved fromhttp://www.journal4research.org/articles/J4RV3I1007.pdf

  • Mishra, S., Garg, S., Grover, M., & Gupta, T. (2020).Examination of the impact of nonperfroming assets on profitability in India.Journal of Critical Review, 7(12), 2905-2914.

  • Mohnani, P., & Deshmukh, M. (2013). A study of non-performing assets on selected public andprivate sector banks. International Journal of Science and Research, 2 (4), 278-281.

  • Narayanan, B.B.S., & Surya, R. (2014).A study on non-performing assets in Indian bank.International Journal of Management Research & Business Strategy, 3 (3), 144-155.

  • Narula, S., & Singla, M. (2014).Empirical study on non performing assets of banks.International Journal of Advance Research in Computer Science and ManagementStudies, 2(1), 194-199.

  • Prasad, G.V.B., & D.Veena, D. (2011).NPAs reduction strategies for commercial banks inIndia.International Journal of Management & Business Studies, 1 (3), 47-53.

  • Rai, K. (2012). Study on performance of NPAs of Indian commercial banks. Asian Journal ofResearch in Banking and Finance, 2(12), 16-26.Rajput, N., Gupta, M., & Chauhan, A.K. (2012). Profitability and credit culture of NPAs:Anempirical analysis of PSBs. International Journal of Marketing, FinancialServices andManagement Research, 1(9), 91-109. Retrieved from www.indianresearchjournals.com

  • Rao, D.S. (2008). Banking reforms in India: An evaluative study of the performanceofcommercial banks. New Delhi, India: Regal Publications.

  • Rath, P.K., Mishra, P.C., & Mishra, B.B. (2013). Menace of non-performing assets inbanks.NewDelhi, India: Serials Publications.

  • Reserve Bank of India.(2015). Master circular- Prudential norms on income recognition, assetclassification and provisioning pertaining to advances. Retrieved fromhttps://rbidocs.rbi.org.in

  • Sant, R. K. (2014). Non performing assets by public sector banks in recent years.EuropeanAcademic Research, 1 (11), 5086-5105. Retrieved from www.euacademic.org

  • Saxena, M., Srivastava, N., & Mohan, P. (2013). Dynamics of non performing assets in Indiancommercial banks under the new paradigm shift. International Journal ofMarketing,Financial Services & Management Research, 2(4), 136-149.

  • Singh, A. (2013). Performance of non-performing assets (NPAs) in Indian commercial banks.International Journal of Marketing, Financial Services &Management ,2 (9), 86-94.

  • Soni, P., &Heda, B.L. (2014).NPA’s impact on financial performance of public sectorbanks.RESEARCH HUB–International Multidisciplinary Research Journal, 1(3), 3-6.

  • Sontakke, R. N., &Tiwari, C. (2013). Trend analysis of non performing asset in scheduledcommercial banks in India. International Journal of Application orInnovation inEngineering & Management. Retrieved from http://www.ijaiem.org

  • Srinivas, K. T. (2013). A study on Non-Performing Assets of commercial banks inIndia.ABHINAV- International Monthly Refereed Journal of Research in Management&Technology,2, 61-69. Retrieved from www.abhinavjournal.com

  • Yadav, S. (2014). NPAs: Rising trends and preventive measures in Indian banking sectors.International Journal of Advance Research in Computer Science and Managementstudies, 2(1), 129-141.

  • Zafar, S.M.T, Maqbool, A., & Khalid, S.M. (2013).Non-performing assets and its impact onIndian public sector banks.International Journal of Marketing, FinancialServices &Management Research, 3(2), 68-87. Retrieved from www.indianresearchjournals.com​

bottom of page