NPA management by commercial banks – problems & prospects of Indian MSME sector

Indian Micro, Small and Medium Enterprises play a vital proportion in different sectors like manufacturing, services, exports and employment, and to maintain a healthy and a sound banking system MSME units are prone to various business risks due to which they fall sick or sometimes closed due to heavy losses or many of them becomes Non-Performing Assets (NPA) in the accounts of the banks which are very essential in order to grow and remain in this competitive environment. Reserve Bank of India has taken several measures in developing & functioning of the banking sector to be the best indicator for the health of the banking industry as its level of Non-Performing Assets (NPAs) reflects the performance of banks. NPAs have become a major in the Indian banking sector which has a direct impact on the profitability, liquidity and solvency position of the bank. The paper highlights to understand the concept of lending to priority sector and non priority sector of commercial banks in which to identify the problems and prospects of Micro Small Medium Enterprises and also to understand the concept of managing of Non Performing Assets in banking industry various measures has been taken by Reserve Bank of India.