NPA: A Formidable Challenge for the Indian Economy

Banks are those financial institutions that constitute the heart of an economy irrespective of its current status i.e., whether developed or developing. They play an important role in the mobilization and allocation of resources for the growth of the economy. The performance of these banks is best indicated by their level of Non-Performing Asset. Indian financial structure is currently facing a crisis in credit quality as the NPAs are rising day by day. The NPAs would destroy the current profit, interest, and efficiency of the banks hence choking the credit lending capacity in turn entrepreneurship in the country. Malfeasance, lacking collaterals, political influence, competitive developed economies, and dearth of post disbursement monitoring system are few culpable factors that have triggered the catastrophe of the banks. This paper first analyzes the levels, movements, and trends in the NPAs and anatomizes the cause for increasing NPAs. The denouement part further suggests a few unique ways to tackle the problem further emphasizing why the banks need to look into the crisis for ensuring the smooth functioning of the economy.