A Study on Management of Non-Performing Assets

Abstract

NPAs are a key concern for banks in India and are probably the best indicator of health of banking industry. Indian Banks are struggling with $180 billion of stressed assets acting as a hindrance on growth prospects of world's fastest expanding major economy. The money locked up in NPAs will bring down the overall profitability of banks and affecting the lending capacity and thereby the high probability of credit defaults. That is, the strong credit growth is almost synonymous with a healthy operating environment and strong economic growth. Though the Govt. and regulators are paying great attention to India's large and mounting NPAs from exempting companies pursuing acquisition as part of resolution plans under IBC from open offer obligations applied under Indian Takeover Regulations; referring 12 stressed accounts, totaling about 25% of current gross NPAs to IBC; clearing an ordinance to amend Banking Regulation Act, giving thereby powers to RBI to direct banks to resolve bad loans. However, the problem is not yet resolved. The paper seeks to analyse the current Indian Banking crisis in view of rising NPAs while also enlisting the suggestions to stakeholders to its recovery.