Accounting & Marketing

An Empirical Analysis on Asset Quality of Indian Banking Industry - Nonperforming Assets to Advances

Abstract

Srinivas Rao, Chilukuri SS, Madhav VV

The banking is the life blood of the economy acting as a catalyst in the regulation and monitoring of financial activities and contributes for economic growth. They play a crucial role as manufacturers and purveyors of money in effective allocation of idle savings to productive utilisation. As a fiduciary it provides leverage by bring money and money related assets to the access of needy borrowers or for any other developmental activities. In this process banks are prone to risk of loss due to the uncertainties of counterparty. The increase in default is leading to rise in Non-Performing Assets, impairing the profitability and quality assets in financial statements of banking industry. The present paper examines status of quality assets of Indian banking industry in relation to Non-Performing Assets to advances of all Scheduled Commercial Banks for 12 years from 2001-02 to 2012-13 based on secondary source of information retrieved from “Handbook of Statistics on the Indian Economy 2013-2014”. The study observed that there is major penetration of advances from Public Sector Banks indicating higher share among all Scheduled Commercial Banks and there is tremendous increase in advances over the period of study, nevertheless the decline trend in NPAs shown improvement in the asset quality of Scheduled Commercial Banks of India.