A Study on Reduction of Non-Performing Assets in Commercial Banks (A Case Study of Alwar District, Rajasthan, India)

Mridul Dharwal, Ankur Agarwal, K. R. Gola


The Indian Banking Industry has played a pivotal role in the socio- economic augmentation of the country. The financial sector reforms initiated in 1991 have commendably changed the visage of the Indian banking. The banking industry has transmogrified in a phased manner from a regulated environment to a deregulated market economy. Over the last few years Indian Banking, in its attempt to integrate itself with the global banking has been facing lots of hurdles in its way due to its inherent weaknesses, despite its high sounding claims and lofty achievements. In a developing country like ours, banking is seen as an important instrument of development, while with the strenuous NPAs, banks have become helpless burden on the economy. Looking to the changing scenario at the world level, the problem becomes more ironical because Indian banking, cannot afford to remain unresponsive to the global requirements. The banks are, however, aware of the grim situation and are trying their level best to reduce the NPAs ever since the regulatory authorities i.e., Reserve Bank of India and the Government of India are seriously chasing up the issue. Banks are exposed to credit risk, liquidity risk, interest risk, market risk, operational risk and management/ownership risk. It is the credit risk which stands out as the most dreaded one. Though often associated with lending, credit risk arises whenever a party enters into an obligation to make payment or deliver value to the bank. The nature and extent of credit risk, therefore, depend on the quality of loan assets and soundness of investments. Based on the income, expenditure, net interest income, NPAs and capital adequacy one can comment on the profitability and the long run sustenance of the bank. A Non performing asset is an asset or account of borrower, which has not been serviced by the borrower and the bank has stated the same as sub-standard, doubtful or loss assets, as per the norms and directions of the RBI. Non performing assets have emerged as an alarming threat to the Indian banking industry and their reduction has become synonymous with professional functioning and management of banks.

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