A Study on Reduction of Non-Performing Assets in Commercial Banks

The role of the banking system in the growth of economic development has always been praiseworthy and monitored with great caution. It is the strength and contribution of the banking system that can have far-reaching implications on the development of the whole economy. The link between the financial sector and economic growth has been the subject of a large literature. Keeping in view the essence of the banking system, policies are designed for the proper regulation of banks. In India, after the nationalization of banks in 1969, the geographical presence of banking system increased considerably but the profitability and economic viability of various branches were negatively impacted due to increase cost of maintenance and lending to masses at reasonable cost considering the social objective of the banking sector in the growth of the economy. Despite the utmost care taken by Government and banking regulations, many assets or loans of the bank get converted into bad debts and stop generating any income for the bank. Such assets or loans are referred to as Non-performing assets (NPAs) or non-performing loans (NPLs).