Measuring The Impact of Non-Performing Assets on The Profitability of Indian Scheduled Commercial Banks

The study aims to measure the impact of non-performing assets on the profitability of the Indian scheduled commercial banks. The study is based on the secondary data for the period 2004–05 to 2014–15. Regression analysis has been used in the study where; return on assets, return on equity and net interest margin have been used as a proxy variables for profitability of the banks while Gross NPA to Gross advances ratio and Net NPA to Net advances ratio has been used as independent variables to denote the non-performing assets of the banks. It was found from the study that the currently there is an increasing trend of non-performing assets in Indian scheduled commercial banks while all the three measures of profitability have shown a declining trend. It was also found from the study that NPA has an adverse impact on the profitability of the banks. Return on assets and return on equity is found to be negatively and significantly related to the gross NPA to gross advances ratio while net interest margin has shown negative but insignificant relationship with both the ratios of NPA.