An Assessment of Loan Defaults and Its Impact on Profitability of Banks
Author(s):
Dr. Varsha Agarwal, Agarwal Ishika, Aishwarya Rajesh, Aishwarya V Rathod, Aniket Gandhi, Oshika Soni
Keywords:
Non-Performing Assets (NPA), Banks, Profitability, Credit, Public Sector Banks (PSB)
Abstract
Banking sector plays a vital role in the growth of an economy. At present the situation of this sector is deteriorated: the rising number of NPAs in banks has become a major concern. Numerous articles show the increasing records of NPAs in the bank very frequently. Numerous researches have been conducted to dive into the status of NPAs in the bank, the reasons of this increase, the effects and many related consequences and affairs. On a macro scale, rising NPAs of banks hinder the economic growth. It affects the livelihood of all classes of people, all types of businesses and banks themselves. This Paper gives a brief introduction of the working of banks, meaning of NPA and the possible reasons for the rise in NPA. The main purpose of our study is to discuss the major effects of high number of NPAs on the bank itself. We have briefly discussed each possible effect. Our research constitutes of secondary data. There is data to show the present scenario of NPA in India. We analyzed various research papers and statistics and came up with major effects of NPAs on banks. The findings of our research came such that the effects of NPAs on banks are decrease in the profitability of bank, decrease in the overall credit rating of the bank, reduction in bank’s lending potential and increase in the cost of funds. Each effect is elaborated with the help of other research studies. The conclusion of the paper gives a summary of the implications of NPAs and the steps and measures banks could take to come out of this situation.
Article Details
Unique Paper ID: 154144

Publication Volume & Issue: Volume 8, Issue 10

Page(s): 195 - 202
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