Non-performing assets (NPAs) and its determinants: a study of Indian public sector banks

Dhananjaya Kadanda () and Krishna Raj ()
Additional contact information
Dhananjaya Kadanda: Institute for Social and Economic Change (ISEC)

Journal of Social and Economic Development, 2018, vol. 20, issue 2, No 1, 193-212

Abstract: Abstract There has been increased concern about the continued deterioration in the asset quality of Indian public sector banks in recent times. Reserve Bank of India’s Financial Stability Report 2017 acknowledged that the risks to the Indian banking sector have been increasing in the post-recession period, particularly, the risk of accumulating non-performing assets (NPAs). In this perspective, the current paper investigates the extent and growth of NPAs and interbank disparity in NPA management among public sector banks. We found that the profitability of public sector banks is declining in the post-crisis period and the amount of NPAs has been on the rise. Further, the recovery mechanisms have proved to be ineffective in containing the problem of bad debts. In a dynamic panel analysis, we also examined the determinants of NPAs in public sector banks and found that factors such as past NPAs, the operating efficiency of the bank, capital adequacy, GDP growth rate, and interest rate are the major determinants of the growth of NPAs in Indian public sector banks.

Keywords: Non-performing assets; Net NPA; Gross NPA; Public sector banks (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://link.springer.com/10.1007/s40847-018-0068-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jsecdv:v:20:y:2018:i:2:d:10.1007_s40847-018-0068-0

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40847

DOI: 10.1007/s40847-018-0068-0

Access Statistics for this article

Journal of Social and Economic Development is currently edited by M.G. Chandrakanth, D. Rajasekhar, Anand Inbanathan and S. Madheswaran

More articles in Journal of Social and Economic Development from Springer, Institute for Social and Economic Change
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().