Role of Non-Performing Assets (NPA) On Profitability of the Indian Banking System

GARIGE SHRAVANI

ROII NO: 24R11EOO16, II Year II Semester, Department of Management Studies, Geethanjali College of Engineering and Technology, Hyderabad, Telangana, India

Email: 24r11e0016@gcet.edu.in

MS. SHAINAZ BEGUM

ASSISTANT PROFESSOR

Department of Management Studies

Geethanjali College of Engineering and Technology

Email: shainaz.mba@gcet.edu.in

Abstract: Non- performing Assets (NPAs) are one of the most important indicators of the financial health and operational efficiency of a banking institution. A loan becomes a non-performing asset when the borrower fails to make the required repayment of principle or interest for the period prescribed by banking regulations. Rising NPAs reduce the flow of internet income , increase provisioning requirements , block bank funds, weaken capital adequacy and ultimately affect profitability. The present study examines the role of NPAs in influencing the profitability of selected Indian public sector and private sector banks. The study uses secondary data collected from bank annual reports, Reserve Bank of India publication , financial database and published research studies. Key indicators such as Gross NPA, Net NPA, Return on Assets, Return on Equity, Net Profit Margin and Operating Profit Margin are considered for understanding the relationship between asset quality and profitability.

Keywords: Non-Performing Assets, Bank Profitability, Gross NPAs, Net NPAs, Public Sector Banks, Private Sector Banks