According to Aggarwal (1975) “Survey of related literature implies locating, reading and evaluating reports of research as well as reports of casual observation and opinion that are related to the individual’s planned research project” (p.108).
The search for related literature is one of the first steps in the research process. It is a valuable guide to dine the problem, recognizing its signification, suggesting promising data-gathering devices, appropriate study design and sources of data. Though review of literature is an exacting task, calling for a deep insight and clear perspective of the overall field, for any worthwhile study, the researcher needs an adequate familiarity with the work, which has already been done in area of his choice.
According of Best (1987), “A familiarity with the literature in any problem area helps a student to discover what is already known, what others have a attempted to find out, what methods of work have been promising or disappointing and what problems remain to be solved.”
The identification of a problem, development of a research design and determination of a size and scope of the problem all depend upon the study and intensity with which a researcher has examined the literature related to the work. Mouly George J.C. (1963) viewed, “The success of the researchers efforts will depend in no small measure on the extent to which he capitalizes on the advances-both empirical and theoretical made by previous researchers. He draws maximum benefit from the design and procedures of the previous researchers, matches his conclusions with the conclusions drawn earlier and tries to add from his side a line or two to the existing store of knowledge.
Importance of Review of Literature
The review of a related material is a time consuming but fruitful phase of research program.
The importance of related literature can be listed follows:
Literature Review on NPAs:
Non-Performing Assets have negative impact on banking stability and growth. Its impact on erosion of profit and
quality of asset was not seriously considered in Indian banking prior to 1991. There are many reasons cited for the alarming level of NPA in Indian banking sector. Asset quality management was not prime concern in Indian banking sector till 1991, but was mainly focused on performance objectives such as opening wide networks/branches,
development of rural areas, priority sector lending, higher employment generation, etc. The accounting treatment also failed to project the problem of NPA, as interest on loan accounts were accounted on accrual basis.
The accumulated level of NPA in post-liberalization period forced policy makers to reform banking sector. A Committee on Banking Sector Reforms known as Narasimham Committee was set up by RBI to study the problems faced by Indian banking sector and to suggest measures. The committee identified NPA as a major threat and recommended prudential measures for income recognition, asset classification and provisioning requirements. These measures embarked on transformation of the Indian banking sector into a viable, competitive and vibrant sector. The committee recommended measures to improve “operational flexibility” and “functional autonomy” so as to enhance “efficiency, productivity and profitability” (Chaudhary and Singh, 2012).
Though many published articles are available in the area of management of non-performing assets, which are either bank specific or banking sector specific, there are hardly any state of specific researches.
A synoptic review of the literature brings to the fore insights into the determinants of NPL across Countries. A review of relevant literature has been detailed here under: A considered view is that banks’ lending policy could have crucial influence on non-performing loans (Reddy, 2004). He critically examined various issues pertaining to terms of credit of Indian banks. In this context, it was viewed that ‘the element of power has no bearing on the illegal activity. A default is not entirely an irrational decision. Rather a defaulter takes into account probabilistic assessment of various costs and benefits of his decision’.
Mohan (2003) conceptualized ‘lazy banking’ while critically reflecting on banks’ investment portfolio and lending policy. The Indian viewpoint alluding to the concepts of ‘credit culture’ owing to Reddy (2004) and ‘lazy banking’ owing to Mohan (2003a) has an international perspective since several studies in the banking literature agree that
banks’ lending policy is a major driver of non-performing loans. Furthermore, in the context of NPAs on account of priority sector lending, it was pointed out that the statistics may or may not confirm this. There may be only a marginal difference in the NPAs of banks’ lending to priority sector and the banks’ lending to private corporate sector. Against this background, the study suggests that given the deficiencies in these areas, it is imperative that banks need to be guided by fairness based on economic and financial decisions rather than system of conventions, if reform has to serve the meaningful purpose. Experience shows that policies of liberalization, deregulation and enabling environment of comfortable liquidity at a reasonable price do not automatically translate themselves into enhanced credit flow. Although public sector banks have recorded improvements in profitability, efficiency (in terms of intermediation costs) and asset quality yet, they continue to have higher interest rate spreads but at the same time earn lower rates of return, reflecting higher operating costs (Mohan, 2004).
Bhattacharya (2001) rightly points to the fact that in an increasing rate regime, quality borrowers would switch over to other avenues such as capital markets, internal accruals for their requirement of funds. Under such circumstances, banks would have no option but to dilute the quality of borrowers thereby increasing the probability of generation of NPAs.
In another study, Mohan (2003) observed that lending rates of banks have not come down as much as deposit rates and interest rates on Government bonds. While banks have reduced their prime lending rates (PLRs) to some extent and are also extending sub-PLR loans, effective lending rates continue to remain high. This development has adverse systemic implications, especially in a country like India where interest cost as a proportion of sales of corporate are much higher as compared to many emerging economies.
The problem of NPAs is related to many internal and external factors confronting the borrowers (Muniappan, 2002). The internal factors are diversion of funds for expansion/diversification/modernization, taking up new projects, helping/promoting associate concerns, time/ cost overruns during the project implementation stage, business failure, inefficient management, strained labour relations, inappropriate technology/technical problems, product obsolescence, etc., while external factors are recession, non-payment in other countries, inputs/power shortage, price escalation, accidents and natural calamities.
In the Indian context, Rajaraman and Vasishtha (2002) in an empirical study provided an evidence of significant bivariate relationship between an operating inefficiency indicator and the problem loans of public sector banks. In a similar manner, largely from lenders’ perspective, Das and Ghosh (2003) empirically examined non-performing loans of India’s public sector banks in terms of various indicators such as asset size, credit growth and macroeconomic condition, and operating efficiency indicators. Sergio (1996) in a study of non-performing loans in Italy found evidence that, an increase in the riskiness of loan assets is rooted in a bank’s lending policy adducing to relatively unselective and inadequate assessment of sectorial prospects. Interestingly, this study refuted that business cycle could be a primary reason for banks’ NPLs. The study emphasized that increase in bad debts as a consequence of recession alone is not empirically demonstrated. It was viewed that the bank-firm relationship will thus; prove effective not so much because it overcomes informational asymmetry but because it recoups certain canons of appraisal. In a study of loan losses of US banks, McGovern (1993) argued that ‘character’ has historically been a paramount factor of credit and a major determinant in the decision to lend money.
Banks have suffered loan losses through relaxed lending standards, unguaranteed credits, the influence of the 1980s culture, and the borrowers’ perceptions. It was suggested that bankers should make a fairly accurate personality- morale profile assessment of prospective and current borrowers and guarantors.
Besides considering personal interaction, the banker should:
In addition, banks can minimize risks by securing the borrower’s guarantee, using Government guaranteed loan programs, and requiring conservative loan-to-value ratios. Bloem and Gorter (2001) suggested that a more or less predictable level of non-performing loans, though it may vary slightly from year to year, is caused by an inevitable number of ‘wrong economic decisions’ by individuals and plain bad luck (inclement weather, unexpected price changes for certain products, etc.). Under such circumstances, the holders of loans can make an allowance for a normal share of non-performance in the form of bad loan provisions, or they may spread the risk by taking out insurance. Enterprises may well be able to pass a large portion of these costs to customers in the form of higher prices. For instance, the interest margin applied by financial institutions will include a premium for the risk of non- performance on granted loans.
At this time, banks’ non-performing loans increase, profits decline and substantial losses to capital may become apparent. Eventually, the economy reaches a trough and turns towards a new expansionary phase, as a result the risk of future losses reaches a low point, even though banks may still appear relatively unhealthy at this stage in the cycle.
Gupta’s study (1983) on a sample of Indian companies financed by ICICI concludes that certain cash flows coverage ratios are better indicators of corporate sickness.
Classification of NPA
NPA may be classified into Gross NPA and Net NPA. Gross NPA is the total of substandard advances, doubtful assets
and loss assets. Literature focused on post-liberalization period mainly focused on trends in movement of NPA, its major reasons, impact and effectiveness of various NPA management measures. Most of these studies utilized NPA ratios to derive conclusions on NPA in post-liberalization period.
Factors Responsible for NPA
Various reasons can be cited for an account becoming NPA. An asset turns to NPA when the borrower fails to repay the
interest and/or principal on agreed terms. The causes for NPA are classified differently; into systematic and situational causes (Istrate et al 2007) into overhand component and incremental component (Poongavanam, S. 2000; Kumar, BS. 2005), into internal and external factors (Misra and Dhal. 2011; Muniappan. 2002), into random and non- random factors (Biswas and Deb, 2005) based on its effects (Islam, et al. 2005) and into bank-specific business and institutional environment factors (Boudriga et al, 2009). The reasons classified into internal factors and external factors are more common in literatures.
With regard to the reasons for NPA, Reddy, PK (2002) opined that the problem of NPA is not mainly because of lack of strict prudential norms, but due to legal impediments, postponement of the problem by the banks to show higher returns and manipulation by the debtors using political influence. Reddy briefed that macro-factors that includes real effective exchange rate and growth in real GDP affect the level of NPAs. With regard to the bank specific variables, the authors found that banks which charges relatively higher real interest rates and have a penchant for taking on risk tends to experience greater non-performing loans.
Gopalakrishnan, TV (2005) classified the causes for NPA into political, economic, social and technological. The author opined that neglect of proper credit appraisal, lack of follow-up and supervision, recessional pressures in economy, change in government policies, infrastructural bottlenecks, and diversion of funds etc. as the major cause for NPA.
Aggarwal and Mittal (2012) pointed out that the major reasons for NPA includes improper selection of borrowers activities, weak credit appraisal system, industrial problems, inefficient management, slackness in credit management and monitoring, lack of proper follow-up, recessions and natural calamities and other uncertainties.
Espinoza, R and Prasad, A (2010) emphasized that financial system shocks emanate from firm specific factors and from macroeconomic imbalances. Fainstein, G (2011) classified reasons for NPA into macroeconomic, banking sector and also microeconomic level variables. Further he says that various factors like political, economic, social and technological reasons are also responsible for NPA. The economic causes are further classified in internal and external causes. In a similar study on NPA, Collins, NJ and Wanjau, K (2011) explained a direct relationship between interest rate and NPA. The study noted that interest rate spread affect performing assets in banks as it increases the cost of loans charged on the borrowers, regulations on interest rates have far reaching effects on assets non-performance, for such regulations determine the interest rate spread in banks and also help mitigate moral hazards incidental to NPAs.
To mention some of the important reasons for NPA, as summarized in various literatures are below:
Impact of NPA
Batra, S (2003) mentioned that the most important business implication of the NPAs is that it leads to the credit risk
management assuming priority over other aspects of bank’s functioning. The bank’s whole machinery would thus be pre- occupied with recovery procedures rather than concentrating on expanding business. RBI, through various circulars, stipulated guidelines to manage NPA. This view was supported by Yadav, MS (2011) and stated that higher NPA engage banking staff on recovery measures which includes filing suits to recover loan amount instead of devoting time for planning to mobilization of funds. Thus NPA affects the performance and profitability of banks. The most notable impact of NPA is change in banker’s attitude which may hinder credit expansion to productive purpose. Banks may incline towards more risk-free investments to avoid and reduce riskiness, which is not conducive for the growth of economy.
Sethi, J and Bhatia, N (2007), clarified on implications of NPA accounts that Banks cannot credit income to their profit and loss account to the debit of loan account unless recovery thereof takes place. Interest or other charges already debited but not recovered have to be provided for and provision on the amount of gross NPAs also to be made. All the loan accounts of the borrower would be treated as NPA, if one account is NPA. Many authors emphasized the straddling impact of NPA and stressed its impact on loan growth. A higher NPA force banks to invest in risk-free investments, thus directly affect the flow of funds for productive purpose.
Bloem et al (2001) remarked that issues relating to NPA affect all sectors (in particular if parallel issues with defaulting trade credit is also considered). The most serious impact, however, is on the financial institutions, which tend to own large portfolios, indirectly; the customers of these financial intermediaries are also implicated; deposit holders, shareholders and so forth. Add to this, NPA is not only affecting the banks and its intermediaries, it is having impact on the development of the nation as well. For a bank, NPA means unsettled loan, for which they have to incur financial losses. The cost for recovering NPA is as well considerable. There are banking failures on account of the mounting NPA since it is affecting the profitability and long run survival of the bank. In the seminal study on ‘credit policy’, systems, and culture’, Reddy (2004) raised various critical issues pertaining to credit delivery mechanism of the Indian banking sector. The study focused on the terms of credit such as interest rate charged to various productive activities and borrowers, the approach to risk management, and portfolio management in general. There are three pillars on which India’s credit system was based in the past; fixing of prices of credit or interest rate as well as quantum of credit linked with purpose; insisting on collateral; and prescribing the end-use of credit. Interest rate prescription and fixing quantum has, however, been significantly reduced in the recent period.
The study also highlighted the issues in security-based or collateralized lending, which need careful examination in the context of growing services sector. Given the fungibility of resources, multiple sources of flow of resources, as well as application of funds, the relevance and feasibility of end-use restrictions on credit need a critical review. The link between formal and informal sectors shows that significant divergence in lending terms between the two sectors still persists, despite the fact that the interest rate in informal markets is far higher than that of the formal sectors- the banking sector. The convergence between formal and informal sectors could be achieved by pushing the supply of credit in the formal sector following a supply leading approach to reduce the price or interest rate. Furthermore, in the context of NPAs on account of priority sector lending, it was pointed out that the statistics may or may not confirm this. There may be only a marginal difference in the NPAs of banks’ lending to priority sector and the banks’ lending to private corporate sector. Against this background, the study suggested that given the deficiencies in these areas, it is imperative that banks need to be guided by fairness based on economic and financial decisions rather than system of conventions, if reform has to serve the meaningful purpose. Experience shows that policies of liberalization, deregulation and enabling environment of comfortable liquidity at a reasonable price do not automatically translate themselves into enhanced credit flow.
Although public sector banks have recorded improvements in profitability, efficiency (in terms of intermediation costs) and asset quality in the 2000, they continue to have higher interest rate spreads but at the same time earn lower rates of return, reflecting higher operating costs (Mohan, 2004). Consequently, asset quality is weaker so that loan loss provisions continue to be higher. This suggests that, whereas, there is greater scope for enhancing the asset quality of banks, in general, public sector banks, in particular, need to reduce the operating costs further. The tenure of funds provided by banks either as loans or investments depends critically on the overall asset-liability position. An inherent difficulty in this regard is that since deposit liabilities of banks often tend to be of relatively shorter maturity, long term lending could induce the problem of asset-liability mismatches. The maturity profile of commercial bank deposits shows that less than one fifth is of a tenor of more than three years. On the asset side, nearly 40 per cent has already been invested in assets of over three year maturity. Banks also have some capacity to invest in longer term assets, but this capacity will remain highly limited until the fiscal deficit remains as high as it is and the Government demand for investment in long dated bonds remains high. Some enhancement of their capacity to invest in infrastructure, industry and agriculture in longer gestation projects can be achieved by allowing a limited recourse to longer term bond issues.
Karunakar, M et al (2008) explained that NPA results in deleterious impact on the return on assets. It happens in the following ways;
Management of NPA
Ranjan and Dhal (2003) opined that horizon of maturity of credit, better credit culture, favourable macroeconomic
and business conditions lead to lowering of NPAs. In its annual report (2010) RBI noted that “management of NPA by banks remains an area of concern, particularly, due to the likelihood of deterioration of the quality of restructured advances”. The NPA of banks is an important criterion to assess the financial health of banking sector. It reflects the asset quality, credit risk and efficiency in the allocation of resources to the productive sectors. Ahmed, JU (2010) noted that since the reform regime there has been various initiatives to contain growth of NPA to improve the asset quality of the banking sector. Commercial banks have envisaged the greatest renovation in their operation with the introduction of new concepts like income recognition, prudential accounting norms and capital adequacy ratio etc. which have placed them in new platform. The growing competition from internal and external constituents and sluggish growth in economy coupled with poor credit-deposit ratio, the large volume of NPAs in the balance sheet and lack of automation and professionalization in the operation have been affecting the banking situation in the country.
Murinde, V and Yaseen, H (2004) on management of NPA made it clear that the traditional approaches to bank regulation are not conducive for management of NPA. These approaches emphasized the view that the existence of capital adequacy regulation plays a crucial role in the long-term financing and solvency position of banks, especially in helping the banks to avoid bankruptcies and their negative externalities on the financial system. In general, capital or net worth serves as a buffer against losses and hence failure. Rather than accommodating measures to combat the NPA issues, the traditional measures tried to protect the interests of deposits through maintaining adequate capital in liquid form. This has affected the availability of funds for productive purpose, since banks were not able to lend it, rather forced to keep as reserves.
One of the central issues facing emerging markets and developing economies is strengthening the financial systems. This is because sound financial systems serve as an important channel for achieving economic growth through the mobilization of financial savings, putting them to productive use and transforming various risks. Borbora, RR (2007) emphasized that the essential components of sound NPA management are- i) quick identification of NPAs, ii) their containment at a minimum level and iii) ensuring minimum impact of NPAs on the financials.
Panta, R (2007) noted that all kinds of lending involves three stages where discretion needs to be exercised (a)Evaluation and assessment of the proposal (b) Timely monitoring and evaluation and (c) Proper assessment of exit decision and modality. (Reserve Bank of India Occasional Papers Vol. 24, No. 3, Winter 2003)
Non-Performing Loans and Terms of Credit of Public Sector Banks in India: An Empirical Assessment Rajiv Ranjan and Sarat Chandra Dhal
In an another study, Mohan (2003) observed that lending rates of banks have not come down as much as deposit rates and interest rates on Government bonds. While banks have reduced their prime lending rates (PLRs) to some extent and are also extending sub-PLR loans, effective lending rates continue to remain high. This development has adverse systemic implications, especially in a country like India where interest cost as a proportion of sales of corporates are much higher as compared to many emerging economies. The problem of NPAs is related to several internal and external factors confronting the borrowers (Muniappan, 2002). The internal factors are diversion of funds for expansion/diversification/ modernization, taking up new projects, helping/promoting associate concerns, time/cost overruns during the project implementation stage, business (product, marketing, etc.) failure, inefficient management, strained labour relations, inappropriate technology/technical problems, product obsolescence, etc., while external factors are recession, non-payment in other countries, inputs/power shortage, price escalation, accidents and natural calamities.
Besides considering personal interaction, the banker should (i) try to draw some conclusions about staff morale and loyalty, (ii) study the person’s personal credit report, (iii) do trade-credit reference checking, (iv) check references from present and former bankers, and (v) determine how the borrower handles stress. In addition, banks can minimize risks by securing the borrower’s guarantee, using Government guaranteed loan programs, and requiring conservative loan-to-value ratios. Bloem and Gorter (2001) suggested that a more or less predictable level of non-performing loans, though it may vary slightly from year to year, is caused by an inevitable number of ‘wrong economic decisions’ by individuals and plain bad luck (inclement weather, unexpected price changes for certain products, etc.).
Fuentes and Maquieira (1998) undertook an in-depth analysis of loan losses due to the composition of lending by type of contract, volume of lending, cost of credit and default rates in the Chilean credit market. Their empirical analysis examined different variables which may affect loan repayment: (a) limitations on the access to credit; (b) macroeconomic stability; (c) collection technology; (d) bankruptcy code; (e) information sharing; (f) the judicial system; (g) pre-screening techniques; and (h) major changes in financial market regulation. They concluded that a satisfactory performance of the Chilean credit market, in terms of loan repayments hinges on a good information sharing system, an advanced collection technology, macroeconomic performance and major changes in the financial market regulation. In another study of Chile, Fuentes and Maquieira (2003) analysed the effect of legal reforms and institutional changes on credit market development and the low level of unpaid debt in the Chilean banking sector. Using time series data on yearly basis (1960-1997), they concluded that both information sharing and deep financial market liberalization were positively related to the credit market development. They also reported less dependence of unpaid loans with respect to the business cycle compared to interest rate of the Chilean economy. Altman, Resti and Sironi (2001) analysed corporate bond recovery rate adducing to bond default rate, macroeconomic variables such as GDP and growth rate, amount of bonds outstanding, amount of default, return on default bonds, and stock return. It was suggested that default rate, amount of bonds, default bonds, and economic recession had negative effect, while the GDP growth rate, and stock return had positive effect on corporate recovery rate.
Lis, et.al.,(2000) used a simultaneous equation model in which they explained bank loan losses in Spain using a host of indicators, which included GDP growth rate, debt-equity ratios of firms, regulation regime, loan growth, bank branch growth rates, bank size (assets over total size), collateral loans, net interest margin, capital asset ratio (CAR) and market power of default companies. They found that GDP growth (contemporaneous, as well as one period lag term), bank size, and CAR, had negative effect while loan growth, collateral, net-interest margin, debt-equity, market power, regulation regime and lagged dependent variable had positive effect on problem loans. The effect of branch growth could vary with different lags.
Kent and D’Arcy (2000) while examining the relationship between cyclical lending behaviour of banks in Australia argued that, the potential for banks to experience substantial losses on their loan portfolios increases towards the peak of the expansionary phase of the cycle. However, towards the top of the cycle, banks appear to be relatively healthy - that is, non-performing loans are low and profits are high, reflecting the fact that even the riskiest of borrowers tend to benefit from buoyant economic conditions. While the risk inherent in banks’ lending portfolios peaks at the top of the cycle, this risk tends to be realized during the contractionary phase of the business cycle. At this time, banks’ non- performing loans increase, profits decline and substantial losses to capital may become apparent. Eventually, the economy reaches a trough and turns towards a new expansionary phase, as a result the risk of future losses reaches a low point, even though banks may still appear relatively unhealthy at this stage in the cycle.
Jimenez and Saurina (2003) used logit model for analysing the determinants of the probability of default (PD) of bank loans in terms of variables such as collateral, type of lender and bank-borrower relationship while controlling for the other explanatory variables such as size of loan, size of borrower, maturity structure of loans and currency composition of loans. Their empirical results suggested that collateralized loans had a higher PD, loans granted by savings banks were riskier and a close bank-borrower relationship had a positive effect on the willingness to take more risk. At the same time, size of bank loan had a negative effect on default while maturity term of loans, i.e., short-term loans of less than 1-year maturity had a significant positive effect on default. The brief review of the literature is used to formulate theoretical analysis of non-performing loans undertaken in Section III. The following section highlights the underlying cross-section differences across banks in India using some stylized facts about banks non-performing assets, credit portfolio, and terms of credit, particularly, cost conditions.
To add few more views expressed on the research topic, number of researchers who have studied on the issue of NON- PERFORMING ASSET in banking industry opined as; Krishnamurthy, C.V.(2000) observed that the rising NON- PERFORMING ASSETS is serious diseases for the public sector banks .It shows that the gross NON-PERFORMING ASSETs of PUBLIC SECTOR BANKS are mounting very heavily. The NON-PERFORMING ASSET curses lie between a gross of Rs. 39,253 crores in 1992 -93 to Rs. 45, 463 crores in1997-98.
Munniappan (2002) studied the diseases of NON-PERFORMING ASSET into two factors. One is internal factor in respect of portfolio of funds for expansion, modernization and diversification, accept new projects etc. Second is external factor in respect of recession in economy, other countries suffered from non-performing assets assessment, input/power shortage, price up and downs uncertain natural calamities etc.
Das & Ghosh (2003) studied non-performing loans of Indian PUBLIC SECTOR BANKS on the basis of various indicators like as assets size, operating efficiency, and macroeconomics condition and credit growth.
Gupta, S and Kumar, S (2004) defined that redeeming features of banking sector reforms is the continuing downfall in gross and net NON-PERFORMING ASSET as a proportion of total assets for all bank groups. NON-PERFORMING ASSETS needs resolution otherwise it can break the backbone of entire economic system with financial system.
Banerjee and Dan, A. K (2006) analysed that NON-PERFORMING ASSETs are one of the most crucial problem which is faced by bank to require attention for improvement in the management of PSBs are increasing very speedily at present scenario due to following reason one is government has got to bail out banks with monetary fund provisions sporadically and ultimately taxpayers bear the value. Second is cash borrowed for investment, for not utilized properly, affects the creation of assets and therefore the growth of economy is vulnerable. The author has urged many strategic measures to manage Non playing assets of Public sector banks.
Jatna, Ranu (2009) states main cause of mounting NPAs in public sector banks is due to malfunctioning of the banks. Narasimham Committee identified the NON-PERFORMING ASSETs as one of the possible effects of malfunctioning of PUBLIC SECTOR BANKS.
Dong he (2002) in his study focuses on the nature of NON-PERFORMING ASSET in Indian banking system and define the important role of assets reconstruction companies in resolving NPAs.
Prof G.V.Bhavani Prasad and Veera D (2011) examined that the reason behind the falling revenues from traditional sources is 78% of the total NPAs accounted in PUBLIC SECTOR BANKS.
Dr. P. Hosmani & Hudagi Jugdish (2011) found that a slight improvement in the asset quality reflected by downsize in the NON-PERFORMING ASSET percentage. NPA is an improvement scale for assessing financial performance of Indian banks. The mounting value of NPAs will adversely affected to financial position in term of liquidity, profitability and economic of scale in operation. Bank has to take timely necessary steps against degradation of good performing assets.
Manish B Raval (2012) studies to understand the major composition of NON-PERFORMING ASSET in Indian Banks and compared the three compositions i.e. Priority sector, Non Priority sector and others sector of NPAs between Nationalized and SBI and its associates. The researcher stated that there is no significant difference between three compositions of NPAs to total NON-PERFORMING ASSETS in nationalized banks and SBI and its associates.
Dr. A. Dharmendran (2012) examine the position & growth of standard assets ,substandard assets, loss assets ,gross non-performing assets provision for non-performing assets & net non-performing assets with the help of percentage analysis method & compound growth rate for all the state Co-operative banks in India.
To conclude, the above reviewed views and opinions expressed by eminent economist’s financial analysts and scholars on the topic “Management of NPAs in Banks and Financial institutions “highlights the issues involved in it. They also suggested various measures to be taken to reduce NPAs and recovery procedures to be adopted with the help of legislations and DRT. The researcher is intended and interested to explore the intricacies of the problems relating to NPAs and expose the existing lacuna in recovery procedure. The research study which is divided into Six Chapters and findings will really strengthen the arms of Banks and Financial institutions.
Bharat. D. Dhongade
B.Sc., LLB, MSW, CAIIB, PGDCL, LLM