MANAGING NON PERFORMING ASSETS IN COMMERCIAL BANKS

A strong banking sector is important for flourishing economy. The banking industry has undergone a sea change after the first phase of economic liberalization in 1991 and hence credit management. While the primary function of banks is to lend funds as loans to various sectors such as agriculture, industry, personal loans, housing loans etc., but in recent times the banks have become very cautious in extending loans. The reason being mounting nonperforming assets (NPAs) and nowadays these are one of the major concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset. The NPA growth involves the necessity of provisions, which reduces the overall profits and shareholder’s value. The present paper is based on the empirical study that will explore the trends in the non-performing assets of commercial banks in India in different sectors over the past five years ranging from 20052010 and will also suggest the strategies for reducing them.