The Study of the Effect of Non Performing Assets (NPA) on Return on Assets (ROA) of Major Indian Commercial banks.

After the liberalization policy of 1991, Indian banking sector change dramatically and measure were taken for making Indian banking sector as a world standard. There are many obstacles faced by Indian banks and increasing NPA is one of them. There are two types of NPA-Gross NPA and Net NPA. For present study Net NPA are considered. Reserve Bank of India (RBI) is monitoring these phenomena and declaring guidelines at various times. After the slowdown of 2008, the threat of increasing NPA and decreasing ROA is witnessed. This paper is an attempt to correlate the NPA and ROA of Indian commercial Banks. Though the sample size is small but all major 11 banks (6 Public sector banks and 5 Private sector banks) where chosen for the study. 2010–11 to 2014–15 is the study period for this study. It is found that In this study period of 4 years, NPA increase rate is higher in public sector banks than the private sector banks. NPA of private sector banks are well under control. This study shoes that there is moderate negative correlation of NPA and ROA of Public sector banks. This means as the NPA increases it negatively affects the ROA of banks.