The strength and soundness of a banking system primarily depends upon the quality of the assets. Non-performing assets (NPA) is one of the major concerns for banking system in India. This study analyzes NPA management in Indian banks for the period 2004–2013. The data for the study pertained to gross and net NPAs of different bank groups over the research period, and was collected from the Reserve Bank of India (RBI) website. The results of the study show that there has been a reduction in the NPA ratios over the research period, which indicates improvement in the asset quality of Indian public sector banks, private sector banks, and foreign banks. There was significant improvement in the management of NPAs of the public sector banks. The stringent prudential and provisioning norms and other initiatives taken by the regulatory bodies have pressurized banks to improve their performance, and consequently resulted in reduction of NPA as well as improvement in the financial health of the Indian banking system. The various steps initiated by the RBI and the Government of India in strengthening/improving the functioning of the Debt Recovery Tribunals, Lok Adalats, and SARFAESI Act as a comprehensive settlement policy certainly has resulted in improved recovery of NPA accounts. All these efforts have improved the efficiency and profitability of Indian banks, and have strengthened the financial position of the public sector banks and private sector banks. The study further reveals that despite the huge NPA level of public sector banks, they have been successful in reducing their respective gross and net NPA ratios at par with the private sector banks.
Asset quality, non-performing assets (NPAs), recovery
