A Study on Impact of Non-Performing Assets on Banks' Liquidity and Profitability
Bank Performance, Gross NPA, Liquidity, Net NPA, Profitability
Non-Performing asset (NPA) denotes a classification for loans or advances that are if the scheduled payments of principal or interest amount default are in arrears. In most cases, when loan amount have not been paid for a period of 90 days then debt is classified as non –performing assest. Non-Performing Assets in Indian Banks are considered as the wealth, health & financial status of the industry and trade is the reflection of it. The accruing NPA exposes the banks to higher credit risk, rising due to the failure of non-recovery of loans. This study is make as attempt to analyse such impact of NPA on Bank’s performance. The methodology adopted for the study is by calculating select Liquidity and Profitability ratios and performing statistical tools to understand the relationship between liquidity and profitability of the banks and to measure the impact of NPA on Bank’s performance. The study revealed liquidity of the bank have a positive relation and profitability has a negative correlation with NPAs of the bank. Also, the findings reflect a major impact of NPA on Liquidity and a very less impact on Profitability.