Voice of Intellectual Man- An International Journal

Emerging of non-performing assets is a recurrent problem in the Indian banking sector. Over the past two decades, there have been two such episodes when the banking sector was severely impaired by balance sheet problems. A comparative analysis of thetwobanking crisisepisodes-theoneinthelate1990sandone that started in the aftermath of the 2008 Global Financial Crisis is yet to be resolved. The macroeconomic and banking environment preceding the episodes, the degree and nature of the crises and also the policy responses that have been undertaken and discussed. It is concluded by drawing policy lessons from this discussion and suggests some measures that can be adopted to better deal with a future balance sheet related crisis in the banking sector so that the impact on the real economy can be minimized. Managing bad loans and controlling them at lowest level has become paramount important for the banking industry in recent years. After independence India adopted bank based financial system, where banks and financial institutions are major financial intermediaries for commercial sector credit. It is found that NPAs in Indian banking system came into existence consequent to introduction of prudential accounting norms. The impact of NPAs on the Indian economy is not that alarming as witnessed recently in the East African Region, Japan or another parts of the globe, viz., Russia, rescission hit America and Europe. However, even reduced level of NPAs of the Indian banks is still higher as compared to a developed county around 2 percent warrants continued remedial actions and need strategic measures both at macro and micro levels.