NPA in Banking Sector: As an Indicator of Financial Inefficiency

Banking sector plays very important role in any economy. A healthy and a sound banking system are very essential for growth and development of the economy. Nonperforming assets (NPAs) are one of the best indicators for the health of the banking industry. It reflects the performance of banks. NPA has a direct impact on the profitability, liquidity and solvency position of the bank. Higher NPA indicates inefficiency of the bank and lower NPA indicate better performance and management of funds. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled. Indian banks are struggling with challenges related with NPA's and it has become a major concern for the Indian economy and there is need to adopt various measures to controlled NPAs. This paper is about current situation of NPAs in banking sector.