INDIAN BANKING INDUSTRY AND PROBLEM OF NPAs

Abstract

Granting of credit facility for economic activities in the main reason of banking. Apart from raising the resources’ through the fresh deposits, borrowing etc. recycling of the funds received back from borrowers constitute a major part of funding credit dissension activity. Non recovery of installment as also interest on the loans portfolio negates the effectiveness of this process of the credit cycles. Non recovery also effect s the profitability of the banks besides being required to maintain more owned funds by way of capital and creation of reserves and provisions to act as the cushion for the loans losses. Avoidance of the loan losses is one of the pre-occupation of the management of the banks. While complete elimination of the losses is not possible, bank management aims at keeping the loan losses at lowest level. In fact it is the level of non-performing advances which, to a great extent differ between a good and bad bank. Mounting NPAs may have more wide spread repercussions. To avoid shock waves affecting the system, the salvaging exercise is done by the Government or by the Industry on the behest of the Government/Central Bank of the country pulling pressure on the exchequer. In India the NPAs, which are considered to be at higher levels then those in other countries, have, of late, attracted attention of the public as also International Financial Institutions. This has gained further prominence in the wake of transparency and disclosures measures initiated by RBI during recent years. The Committee on Financial System, Capital Account Convertibility Committee on Non Performing Assets of Public Sector Banks have been dealt with the subject of NPAS in Indian Banks. The subject of high NPAs level in banks has also been frequently raised in various for a. these developments have prompted us to undertake a study of NPAs in banks, to understand the problem, its genesis and influence on the banking industry. In this report there are five chapters . The first chapter on banking industry – growth and emerging issues discussing the history of Indian Banks and its growth and development. The second chapter on Non-performing Assets – Theoretical explains the concept of Non-performing Assets, the norms provided by RBI, causes and effects of NPAs. Third chapter on research design includes review of literature, objectives of the study,