Study of Non Performing Assets of Indian Banks (Period 2001–2014)

The main function of bank is to raise resources in the form of fresh deposits and to provide credit for economic activities. Reserve Bank of India (RBI), acts as an instrument of Government of India, provides mandates to Banks for providing banking services to the unbanked. RBI has set targets in terms of percentage (of total Adjusted Net Bank Credit) to be lent to certain sectors. Sectors like Agriculture, Micro and Small Enterprises, Education, Housing, Export Credit which have negligible access to organize lending market are called Priority Sectors. This type of lending which is at lower commercial lending rate is called Priority Sector Lending. As per the set targets of RBI, Banks have to juggle between the non priority sector (higher commercial lending rate) and priority sector. Because of the various factors involved like slowing down of economy, insufficient rains, policy paralysis etc the borrowers find difficulty in repaying their borrowings, this give rise to increase in Non Performing Assets (NPA) in the books of Banks. Non Performing Assets are loans or an advance where interest and/or installment of principal remain overdue for a period of more than 90 days. The high level of NPA affects operations of banks as it reduces profitability and also major part of bank's fund is kept aside as provision for bad loans. This Paper examines NPA in Priority Sector/Non Priority Sector and analysis of its components. Comparative study is conducted between NPA of Public & Private sector banks. The result showed that Non Priority Sector has higher level of NPA as compared to the Priority Sector Lending. The result showed significant difference between the NPA of Public Sector banks and Private Sector banks.