Non Performing Assets: NPAs An Alarming Issue in Public Sector Bank of India

Abstract

The problem of NPAs started developing in post crisis (2008) period. The private sector as well as public sector banks suffered from this but later the Public sector banks (PSBs) were the worst sufferers. Total bad loans of 39 listed banks have reached the Himalayan height to Rs. 8.29 lakh crores by June 2017(which is nearly 11% of total bank loans of the banking industry). Non Performing Assets (NPA) can be defined as a loan asset, which has ceased to generate any income for a bank whether in the form of interest or principal repayment. Banking in India is one of the most prominent sectors fuelling the growth of Indian economy. This sector is the foundation of modern economic development and key player of development strategy. Public sector banks are the ones in which the government has a major holding. They are divided into two groups, i.e., nationalized banks and State Bank of India and its associates. The future of PSB’s would be based on their capability to continuously construct good quality assets in an increasingly competitive environment and maintaining capital adequacy and stringent prudential norms. Most banks follow Early Warning Systems (EWS) for recognition of probable NPAs, the actual procedures followed varies from bank to bank. The major mechanisms of a EWS followed by banks in India as brought out by a study conducted by Reserve Bank of India at the instance of the Board of Financial Supervision which included the parameters like designating Relationship Manager/Credit Officer for monitoring account/s, preparation of ‘know your client’ profile, credit rating system, identification of watch list / special mention category accounts, monitoring of early warning signals. As a result of steep fall in the profits because of high provisioning of NPAs it is now linked with technology.