Non-Performing Assets in Indian Public and Private Sector Banks

Abstract

This paper aims to identify and examine the factors that impact non-performing assets (NPAs), impede their proper observation, and propose suitable solutions to ensure their efficient monitoring and control. The banks chosen for this research are characterised by elevated Non-Performing Assets (NPAs) and are considered leading banks within their industry. Two of the three key priorities directly related to non-performing assets (NPAs) are identified and addressed in the Global Financial Stability Report of the International Monetary Fund (IMF, 2009): recapitalising weak but viable institutions and resolving failed institutions. This research study identifies the causes of non-performing loans by analysing a collection of 50 factors and develops the required metrics. The factor analysis test was conducted using the statistical software SPSS. The primary impetus to analyse and compare the factors influencing non-performing assets (NPAs) of public and private sector banks in India was the sectoral inequalities in the NPA ratio to advances in these banks. Factors contributing to non-performing assets (NPA) include infrequent engagement or follow-up with borrowers, manipulation of income or financial statements by borrowers, industrial issues, and the death of a family member who earns money.