NON-PERFORMING ASSETS (NPAs)-HOW TO CONVERT INTO PERFORMING ASSETS AND SUPPORT THE ECONOMIC GROWTH

The concept of Non Performing Assets was first introduced by the Narsimham Committee (1991) on “Financial Sector Reforms”. Public Sector Banks (PSBs) have always faced the problem of rising NPAs year after year. The deterioration of NPAs is primarily driven by the public sector banks. Many reasons are attributed to the heavy debt piling of PSBs such as, improper evaluation at the appraisal stage of borrower screening, irregular monitoring of loans, deficiencies in the recovery mechanism, etc. Creditors had weak rights and hence the recovery rate was very low. The problem of NPAs has been a hindrance in the economic development of the country. For measuring the effects of NPAs, we have to assess the performance of banking sector with respect to the factors of economic development. This research article studies the phenomenal deterioration of stressed asset quality, raising potential losses for not making enough provisions to combat the NPAs in the Indian Banking sector. The article observes that over the period of time, NPAs and bad loans have been adding in a spiralling manner in Indian Banks. Despite the treatment of stressed assets and prompt corrective actions as per asset quality report by regulators, the results are appearing at a very slow pace. They are of the opinion that strength and sustainability of the credit growth is the need for robust banking in the times to come.