Non-Performing Assets and Their Impact on Financial Performance: A Comparative Study of SBI and ICICI Bank (2015–2024)

Abstract

The rising volume of Non-Performing Assets (NPAs) has posed a persistent challenge to the financial stability and profitability of the Indian banking sector. This research presents a comparative study of NPAs in two of India’s leading banks—State Bank of India (SBI) and ICICI Bank—spanning the period from 2015 to 2024. The objective is to analyze NPA trends, evaluate the strategies adopted by both banks to manage and reduce NPAs, and assess the impact of NPAs on key financial performance indicators. A descriptive-comparative research design was employed using secondary data from annual reports and RBI bulletins. Statistical tools such as compound annual growth rate (CAGR), t-tests, and Pearson correlation analysis were applied using SPSS software. The findings reveal that both SBI and ICICI Bank experienced a sharp rise in NPAs between 2015 and 2018, followed by a significant decline up to 2024. Although SBI exhibited marginally higher average NPA ratios, the differences were statistically insignificant. However, the impact of NPAs on financial performance differed across banks. For SBI, strong negative correlations were found between NPAs and indicators such as Return on Assets (ROA), Return on Equity (ROE), Earnings Per Share (EPS), and Capital Adequacy Ratio (CAR), indicating significant financial vulnerability. In contrast, ICICI Bank’s performance was moderately affected, with NPAs showing significant inverse relationships mainly with Net Interest Margin (NIM) and EPS. Strategically, SBI focused on legal recourse and restructuring mechanisms, leveraging tools like SARFAESI and the Insolvency and Bankruptcy Code (IBC). ICICI Bank adopted a more technology-driven model, employing AI-based risk assessment, securitization, and shifting towards retail lending. Both strategies proved effective, as evidenced by the decline in NPA levels and improved financial metrics in the post-2018 period. This study offers meaningful insights for banking professionals, policymakers, and investors by showcasing how distinct strategies in public and private sector banks affect asset quality and financial resilience. The research emphasizes the importance of early warning systems, data analytics, and diversified lending portfolios in managing credit risk efficiently.