Non-Performing Assets in India: A Critical Analysis of Public and Private Sector Banks

The banking industry plays a crucial role in the development and growth of the economy of our country, and measurement and maintenance of the asset quality of banks is very important for the development of the banking sector of the country, as it is the very sector that paves the way to bring about development in the country. In India, according to the Reserve Bank of India, the gross Non-Performing Assets in Indian Banks, are valued at around Rs. 400,000 Crore, which stands to be around 90% of the total NPAs in India, where the remainder is accounted by the Private Sector Banks. This is an alarming number. The issue of NPAs has been a major area of concern for primarily those who lend and for those who formulate the policies. There have been various researches that seeks to identify the various causes that contribute to risking NPAs, and the steps that could be taken to fix the issues, where the conclusion has pointed towards a strong governance, proactive banking regulations and stingers to and sturdy legal frameworks, could be the answer to the problems of NPAs. This paper seeks to identify and bring to light the causes that affect the Non-Performing Assets (NPAs), by taking the reference of two banks each respectively, a Public Sector Bank and a Private Sector Bank. The disparities in the NPA ratio to advances in both the sectors fuels this study to analyse and compare the factors that affect the NPAs of Public and Private Sector Banks in India