NPAS In Indian banking sector - trends and issues

Banks plays an important role in the mobilization and allocation of resources in an economy. The sound financial position of a bank is the guarantee not only to its depositors but equally important for the whole economy of the nation.

Today the Indian banking system is among the best in the world because Indian banks are favorable on growth, asset quality and profitability; RBI and Government have made some notable changes in policies and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations of commercial banks. In terms of quality of assets and capital adequacy, these banks have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. PSBs need to strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organizational performance ethic & strengthen human capital.

The best indicator for the health of the banking industry in a country is its level of Non-performing assets (NPAs). Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of provisions, which bring down the overall profitability of banks. The Indian banking sector is facing a serious problem of NPA. The magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled.

In this paper, an effort has been made to evaluate the operational performance of the SCBs in India since 2000, NPAs Trends and issues. The study is diagnostic, exploratory in nature and makes use of secondary data. The statistical tools like Averages, percentages, Mean and Standard Deviations are used to analyze the data. And concluded that New Private Sector Banks and Foreign Banks started with clean slate and latest technologies, the Public Sector Banks and Old Private Sector Banks had to overcome the old systems and employee resistance and introduce the new systems and processes and norms to catch up with the competition.