A STUDY ON RECOVERY CHANNELS OF NPAS: AN EMPIRICAL EVALUATION

Banks are the backbone of a sound financial system as they play a significant role in the growth and development of a country by advancing loans to various sectors of an economy. For sustainable growth of a developing country like India, it is very imperative that its banking sector should be healthy enough to meet capital requirements of different sections. But, from last few years, high magnitude of non-performing assets (NPAs) causes momentous effect on banks earnings as they have to make provisions on NPAs. Hence, it is very crucial that banks should take efficient resolution techniques for recovering massive amount of NPAs in order to improve their financial performance. The present study investigated the various parameters of NPAs in scheduled commercial banks (SCBs) as well as examined the performance of three major legal recovery channels for NPAs that is, Lok Adalats, SARFAESI and DRTs. The study employed ANOVA and Kruskal-Wallis test for analyzing the differences among recovery channels. The analysis revealed that there is significant difference in NPA recovery ratio across these channels. The author found that there has been significant increase in NPA ratios during 2007 to 2018 and concluded that SARFAESI is the most effective recovery channel as its procedure is not lengthy plus it empowers secured creditors to recover their debts without the intervention of court.