An Analysis of NPAs of Scheduled Commercial Banks in India

Abstract

India has a well-developed financial system that is meeting the country's credit and banking needs. During 2022-23, the commercial banks’ total balance sheet rose by double digits, driven by continuous credit growth. The non-performing assets are considered as the best to measure the soundness of its banking sector. Reduced non-performing assets show that banks have improved their credit assessment methods over the period of time, whereas the rising NPAs necessitate the usage of provisions, which reduced the banks’ overall profitability. Banks need to reduce and control its non-performing assets (NPAs) in order to enhance their efficiency and profitability. The share of NPAs in total bank advances is the main indicator of banking health. This paper traces the Non-performing assets’ story from 2014 to 2023. In identifying the trends of NPA, the paper adopts two period classification viz., (a) 2014-2017, exhibiting an upward trend in Gross and Net NPA and (b) 2018 to till date shows downturn in NPAs of Indian Scheduled Commercial Banks (SCBs).GNPA as a percentage of Gross Advances decreased significantly from its peak of 11.2% in 2017-18 to 2.8% in 2023-24. Similarly, NNPA as a percentage of Net Advances rises at 0.6 percent in 2023-24 indicating an improvement in the bank’s asset quality. The NPA level is comparatively higher in public sector banks (PSBs).