Non-performing Assets

T. R. Bishnoi () and Sofia Devi
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T. R. Bishnoi: The Maharaja Sayajirao University of Baroda
Sofia Devi: The Maharaja Sayajirao University of Baroda

Chapter Chapter 7 in Banking Reforms in India, 2017, pp 187-209 from Palgrave Macmillan

Abstract: Abstract Recent rising trend of non-performing assets (NPAs) has become a major concern for banks and RBI both because of its inherent risk of weakening financial system. Effective management of NPAs is essential for preserving the economic value of banks and economic stability. Along with sliding domestic growth during 2009–2012, the banking sector also witnessed a slowdown in its overall performancePerformance associated with rising NPAs. Whether or not slowdown in economic growth was associated with higher level of NPAs of banks? Were NPAs result of asymmetric information problemAsymmetric information problem moral hazard of banks? Empirical analysis showed that there was a statistically significant negative correlationCorrelation between NPAs and real GDP growth rate for each bank group. This supports the hypothesis that higher NPAs of banks were due to slowdown in real domestic economic growth. However, there may be macroeconomic shocks or asymmetric information problemAsymmetric information problem moral hazard of the banks that affects the level of NPAs in some cases.

Keywords: Non-performing assetsNon-Performing assets; Macroeconomic slowdownmacroeconomic slowdown; Asymmetric information; Adverse selection; Moral hazard (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-55663-5_7

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DOI: 10.1007/978-3-319-55663-5_7

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