TRENDS OF NPA IN INDIAN BANKING SECTOR

Abstract

Since the introduction of economic liberalization and financial sector reforms, Banks are under growing pressure to bring down their NPAs (Non Performing Assets) so as to improve their performance and viability. What is bothering the bankers today is the management of NPAs. Over the period this problem has aggravated alarmingly and therefore needs urgent remedial actions, so in this context a good number of circular instruction/guidelines have been issued by bank/Reserve Bank of India. Reserve Bank of India, in the year 1991, appointed a committee under the Chairmanship of Sh. M.Narsimham to examine and give recommendation for Income Recognition, Asset Classification and Provisioning of loan assets of Banks and Financial Institutions. The Committee examined the issues and recommended that a policy of Income Recognition should be objective and based on record of recovery rather than on subjective considerations. On the basis of the recommendations of the Narsimhan Committee, RBI had issued guidelines to all Scheduled Commercial Banks on Income Recognition, Assets Classification and Provisioning in April, 1992 which have been modified from time to time by the RBI on the basis of experience gained and suggestions received from various quarters. The Prudential Norms for Income Recognition, Asset Classification and Provisioning have come into effect from the accounting year 31.03.1993.