A Study of non performing assets in Indian public sector banks

Banking sector plays a vital role in the economic development of a nation. The Indian banking sector has played a significant role in achieving the socio-economic objectives through deposit mobilization, mass branch networking, priority sector lending etc. But in the post liberalization era the Indian banking sector has been facing the reduced productivity, deteriorated asset quality and efficiency and increased cost structure. Among these short comings, the erosion of asset quality is considered as the biggest threat for the development of a sound and efficient banking sector. The deteriorated asset quality affects the profitability, intermediation costs, liquidity, income generating capacity and overall functioning of banks. The reduction in asset quality results in accumulation of nonperforming assets (NPAs). Today the Indian banking sector is facing a serious problem of NPAs. The NPAs in public sector banks have been growing constantly year by year. To improve the efficiency and profitability of banks the NPAs need to be reduced and controlled. This paper highlights the causes for increasing NPAs, impact of NPAs on banks and the magnitude of NPAs in the Indian public sector banks