Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks

Dia Reddy Ganjikunta; Neharika Shrivastava

doi:doi:10.11648/j.ijfbr.20241005.12

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Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks

Dia Reddy Ganjikunta

, Neharika Shrivastava^*

Published in International Journal of Finance and Banking Research (Volume 10, Issue 5)

Received: 28 September 2024 Accepted: 23 October 2024 Published: 13 November 2024

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Abstract

For any economy credit is required for faster growth, but any outstanding advances may turn macroeconomic shocks. There can be various reasons for Non-Performing Assets (NPA) like low scrutiny by banks, wilful defaulter, low earnings affecting ability of entities to pay back loans, economic slowdown, government policies etc. This study aims to bridge this gap by analysing the performance and impact of NPA’s on the State Bank Of India (SBI) top public commercial bank by market capitalisation and HDFC Bank, a top private bank according to market capitalisation. For the current study, HDFC and SBI bank was considered and data for the study was collected using secondary source, i.e. annual reports. The data was collected in a time series format for different financial variables. Keeping Net NPA to Net Advances as an independent variable and Net Profit/Income Ratio and ROA as dependent variable hypothesis was formed. As per the findings, NPA significantly impact profitability of Banks’ and Debt to Asset Ratio. The impact of NPA was found to be more profound in the SBI than HDFC, but it was observed that SBI’s NPA is better managed than that of HDFC, since it made more provisions for NPA, had better loan structures and profitability metrics. It is suggested that Private Commercial Banks can maintain more provisions for NPA and better utilization of assets to reduce their Debt to Asset Ratio to mitigate the negative affect of NPA.

Published in	International Journal of Finance and Banking Research (Volume 10, Issue 5)
DOI	10.11648/j.ijfbr.20241005.12
Page(s)	92-103
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Non-Performing Assets, Banking, Profitability, Return on Assets, Private Sector Bank, Public Sector Bank

References

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APA Style

Ganjikunta, D. R., Shrivastava, N. (2024). Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks. International Journal of Finance and Banking Research, 10(5), 92-103. https://doi.org/10.11648/j.ijfbr.20241005.12

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ACS Style

Ganjikunta, D. R.; Shrivastava, N. Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks. Int. J. Finance Bank. Res. 2024, 10(5), 92-103. doi: 10.11648/j.ijfbr.20241005.12

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AMA Style

Ganjikunta DR, Shrivastava N. Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks. Int J Finance Bank Res. 2024;10(5):92-103. doi: 10.11648/j.ijfbr.20241005.12

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@article{10.11648/j.ijfbr.20241005.12,
  author = {Dia Reddy Ganjikunta and Neharika Shrivastava},
  title = {Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks
},
  journal = {International Journal of Finance and Banking Research},
  volume = {10},
  number = {5},
  pages = {92-103},
  doi = {10.11648/j.ijfbr.20241005.12},
  url = {https://doi.org/10.11648/j.ijfbr.20241005.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20241005.12},
  abstract = {For any economy credit is required for faster growth, but any outstanding advances may turn macroeconomic shocks. There can be various reasons for Non-Performing Assets (NPA) like low scrutiny by banks, wilful defaulter, low earnings affecting ability of entities to pay back loans, economic slowdown, government policies etc. This study aims to bridge this gap by analysing the performance and impact of NPA’s on the State Bank Of India (SBI) top public commercial bank by market capitalisation and HDFC Bank, a top private bank according to market capitalisation. For the current study, HDFC and SBI bank was considered and data for the study was collected using secondary source, i.e. annual reports. The data was collected in a time series format for different financial variables. Keeping Net NPA to Net Advances as an independent variable and Net Profit/Income Ratio and ROA as dependent variable hypothesis was formed. As per the findings, NPA significantly impact profitability of Banks’ and Debt to Asset Ratio. The impact of NPA was found to be more profound in the SBI than HDFC, but it was observed that SBI’s NPA is better managed than that of HDFC, since it made more provisions for NPA, had better loan structures and profitability metrics. It is suggested that Private Commercial Banks can maintain more provisions for NPA and better utilization of assets to reduce their Debt to Asset Ratio to mitigate the negative affect of NPA.
},
 year = {2024}
}

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TY  - JOUR
T1  - Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks

AU  - Dia Reddy Ganjikunta
AU  - Neharika Shrivastava
Y1  - 2024/11/13
PY  - 2024
N1  - https://doi.org/10.11648/j.ijfbr.20241005.12
DO  - 10.11648/j.ijfbr.20241005.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 92
EP  - 103
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20241005.12
AB  - For any economy credit is required for faster growth, but any outstanding advances may turn macroeconomic shocks. There can be various reasons for Non-Performing Assets (NPA) like low scrutiny by banks, wilful defaulter, low earnings affecting ability of entities to pay back loans, economic slowdown, government policies etc. This study aims to bridge this gap by analysing the performance and impact of NPA’s on the State Bank Of India (SBI) top public commercial bank by market capitalisation and HDFC Bank, a top private bank according to market capitalisation. For the current study, HDFC and SBI bank was considered and data for the study was collected using secondary source, i.e. annual reports. The data was collected in a time series format for different financial variables. Keeping Net NPA to Net Advances as an independent variable and Net Profit/Income Ratio and ROA as dependent variable hypothesis was formed. As per the findings, NPA significantly impact profitability of Banks’ and Debt to Asset Ratio. The impact of NPA was found to be more profound in the SBI than HDFC, but it was observed that SBI’s NPA is better managed than that of HDFC, since it made more provisions for NPA, had better loan structures and profitability metrics. It is suggested that Private Commercial Banks can maintain more provisions for NPA and better utilization of assets to reduce their Debt to Asset Ratio to mitigate the negative affect of NPA.

VL  - 10
IS  - 5
ER  -

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Author Information

Dia Reddy Ganjikunta

Department of Economics, University of Illinois Urbana-Champaign, Illinois, USA

Contact Email

http://orcid.org/0009-0005-7386-5587
Neharika Shrivastava

Global Research Hub, Bangalore, India

Contact Email

http://orcid.org/0000-0001-5740-6149

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Plain Text BibTeX RIS

APA Style

Ganjikunta, D. R., Shrivastava, N. (2024). Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks. International Journal of Finance and Banking Research, 10(5), 92-103. https://doi.org/10.11648/j.ijfbr.20241005.12

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ACS Style

Ganjikunta, D. R.; Shrivastava, N. Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks. Int. J. Finance Bank. Res. 2024, 10(5), 92-103. doi: 10.11648/j.ijfbr.20241005.12

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AMA Style

Ganjikunta DR, Shrivastava N. Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks. Int J Finance Bank Res. 2024;10(5):92-103. doi: 10.11648/j.ijfbr.20241005.12

Copy | Download

@article{10.11648/j.ijfbr.20241005.12,
  author = {Dia Reddy Ganjikunta and Neharika Shrivastava},
  title = {Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks
},
  journal = {International Journal of Finance and Banking Research},
  volume = {10},
  number = {5},
  pages = {92-103},
  doi = {10.11648/j.ijfbr.20241005.12},
  url = {https://doi.org/10.11648/j.ijfbr.20241005.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20241005.12},
  abstract = {For any economy credit is required for faster growth, but any outstanding advances may turn macroeconomic shocks. There can be various reasons for Non-Performing Assets (NPA) like low scrutiny by banks, wilful defaulter, low earnings affecting ability of entities to pay back loans, economic slowdown, government policies etc. This study aims to bridge this gap by analysing the performance and impact of NPA’s on the State Bank Of India (SBI) top public commercial bank by market capitalisation and HDFC Bank, a top private bank according to market capitalisation. For the current study, HDFC and SBI bank was considered and data for the study was collected using secondary source, i.e. annual reports. The data was collected in a time series format for different financial variables. Keeping Net NPA to Net Advances as an independent variable and Net Profit/Income Ratio and ROA as dependent variable hypothesis was formed. As per the findings, NPA significantly impact profitability of Banks’ and Debt to Asset Ratio. The impact of NPA was found to be more profound in the SBI than HDFC, but it was observed that SBI’s NPA is better managed than that of HDFC, since it made more provisions for NPA, had better loan structures and profitability metrics. It is suggested that Private Commercial Banks can maintain more provisions for NPA and better utilization of assets to reduce their Debt to Asset Ratio to mitigate the negative affect of NPA.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - Non-Performing Assets (NPA’s) – Impact on Financial Stability of Indian Commercial Banks

AU  - Dia Reddy Ganjikunta
AU  - Neharika Shrivastava
Y1  - 2024/11/13
PY  - 2024
N1  - https://doi.org/10.11648/j.ijfbr.20241005.12
DO  - 10.11648/j.ijfbr.20241005.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 92
EP  - 103
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20241005.12
AB  - For any economy credit is required for faster growth, but any outstanding advances may turn macroeconomic shocks. There can be various reasons for Non-Performing Assets (NPA) like low scrutiny by banks, wilful defaulter, low earnings affecting ability of entities to pay back loans, economic slowdown, government policies etc. This study aims to bridge this gap by analysing the performance and impact of NPA’s on the State Bank Of India (SBI) top public commercial bank by market capitalisation and HDFC Bank, a top private bank according to market capitalisation. For the current study, HDFC and SBI bank was considered and data for the study was collected using secondary source, i.e. annual reports. The data was collected in a time series format for different financial variables. Keeping Net NPA to Net Advances as an independent variable and Net Profit/Income Ratio and ROA as dependent variable hypothesis was formed. As per the findings, NPA significantly impact profitability of Banks’ and Debt to Asset Ratio. The impact of NPA was found to be more profound in the SBI than HDFC, but it was observed that SBI’s NPA is better managed than that of HDFC, since it made more provisions for NPA, had better loan structures and profitability metrics. It is suggested that Private Commercial Banks can maintain more provisions for NPA and better utilization of assets to reduce their Debt to Asset Ratio to mitigate the negative affect of NPA.

VL  - 10
IS  - 5
ER  -

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