International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 7, Issue 2, pp: (1117-1123), Month: October 2019 - March 2020, Available at: www.researchpublish.com
A Descriptive Study on Non- Performing Assets and its recovery mechanisms in Public and Private Sector Banks of India Dr. Gulshan Kumar1, Som Prakash2 1
Associate Professor, Rajshree Institute of Management & Technology, Bareilly
2
Assistant Professor, Rajshree Institute of Management & Technology, Bareilly
Abstract: Indian Banking Sector has been facing several issues regarding the increasing level of Non-performing assets (NPA). Non- performing assets is one of the major concerns for commercial banks in India. It is a serious concern for the liquidity of the banks. It can destroy the financial positions of the banks and it has the potential to harm the investor also. In India, public sector banks and private sector banks, both are facing this serious problem of NPA. The objective of our study is to find out the causes and impact of NPAs in Indian Banking Sector. This paper focuses on secondary based data of NPA where Gross NPA of Public and Private Sector has been compared during 2009-10 to 2018-19. Besides these objectives, it also focuses on the performance of recovery mechanism of NPA in Indian Banking Sector during 2007-08 to 2018-19. Keywords: Non-performing assets, NPA, Public Sector Banks, Private Sector Banks, GNPA, Recovery Mechanism.
1. INTRODUCTION After the introduction of financial sector reforms in 1991, the banking sector of India has been changed rapidly. Many problems arising in the banking sector will affect the economy of India. The function of bank as an intermediary is not running properly. Banking Sector plays a very important role in the recovery process of the country‟s economy. The banking sector has changed from synchronized environment to a decontrolled market based economy. In 1991-1992 India was adopted the open economy. The adoption of liberalization and globalization policy has made tremendous change in the role of banks in India. After the adoption of liberalization and globalization policy, the problem of non- performing asset is catching attention and huge investment has been assumed as NPA in terms of risk management. Non Performing Asset (NPA) now affecting the financial performance of the credit institutions very badly. Non Performing Assets (NPA) resulting in non-recovery or performance of loan portfolio leading to no recovery or less recovery income to the lender. Non Performing Assets (NPA) represent the quantify “Credit Risk”. Bankers have realized to have effective NPA management on their priority list. NPA broadly defined as non-repayment of interest and instalment of principal amount (Das & Ghosh, 2006). According to the “Narasimham Committee Report (1991), those assets (overdraft/ cash credit) for which the interest remains due for a period of four quarters (180 days) should be considered as NPAs”. After, this period had reduced and from March 1995 onwards assets for which interest and principle remains unpaid for a period of 90 days were considered as NPAs. Thus, NPA constitutes an important factor in the banking system as it seriously affects the profitability of the banks. The NPA can broadly be classified into Gross NPA and Net NPA. Gross NPA reflects the quality of the loans made by banks whereas Net NPA shows the actual burden of banks. With effect from March 31, 2005, a non-performing asset (NPA) shall be a loan or an advance where Interest and/or instalments of principal remain overdue for a period of more than 90 days in respect of a Term Loan; The account remains 'out of order' for a period of more than 90 days, in respect of an Overdraft/Cash Credit (ODICC); The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted;
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