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Title: | Impact of non-performing assets on the profitability of the Indian banking sector |
Other Titles: | Contemporary studies of risks in emerging technology, part A |
Authors: | Kaur, Baljinder Kaur, Rupinder Sood, Kiran Grima, Simon |
Keywords: | Financial services industry -- India Banks and banking -- India Debt -- India Banking law -- India Financial institutions -- India Saving and investment -- India |
Issue Date: | 2023 |
Publisher: | Emerald Publishing Limited |
Citation: | Kaur, B., Kaur, R., Sood, K., & Grıma, S. (2023). Impact of non-performing assets on the profitability of the Indian banking sector. In S. Grima, K. Sood & E. Özen (Eds.), Contemporary studies of risks in emerging technology, part A (pp. 257-269). United Kingdom: Emerald Publishing Limited |
Abstract: | Purpose: Worldwide economies have been shattered by the alarming increase in Non-Performing Assets (NPAs) in Banking Sector. In India, the
rise in NPA levels gives a clear insight into the health of industry and state.
This study aims to determine how NPAs in India impact the profitability of
eight banks chosen from the public and private sectors; specifically: Punjab
National Bank (PNB), Bank of India (BOI), UCO Bank, Punjab and Sind
Bank (PSB), HDFC Bank, Axis Bank, ICICI Bank, and Yes Bank; during
the period 2009/2010 to 2017/2018. Design/methodology/approach: The study utilised IBM SPSS version 20 application to carry out our statistical analysis of measures of central location (mean and median), measures of dispersion (standard deviation), to carry out the Kolmogorov–Smirnov test to check the normality of data, the Mann–Whitney U test (for two groups) for median comparison between private and public sector banks and the Kruskal–Wallis test (for more than two groups) for median comparison for more than two banks. p ≤0.01 and p ≤0.05 were the two-tailed significance level used for determining the significance of all statistical tests. Findings: Trend analysis and statistical tests show that the trend in public sector banks to have NPAs is higher compared to private sector banks, and losses arising from NPA impact the banks’ profitability. Practical implications: It is apparent that NPAs are a large threat to banks in India as it reflects the state of the Indian economy. The growth of the economic cycle is predominantly dependent on the smooth and profitable functioning of private and public sector banks. This current study focusses on and compares the impact of NPAs on the profitability of public and private sector banks. NPAs have grown exponentially more in the case of public sector banks than private sector banks, which has affected the former banks’ financial health and performance. Increases in the level of NPAs adversely affect the working style and long-term stability of public and private sector banks in the economy. Social Implications: NPAs have a negative influence on the profitability of the banks as well as on the economic growth of the country too. However, it is recommended that management in the banking sector, particularly the public banks, should use various preventive and recovery strategies to reduce the risk of failure and to keep track of NPAs to stay safe. Originality/value: This study aims to determine how NPAs in India impact the profitability of eight banks chosen from the public and private sectors; specifically: PNB, BOI, UCO Bank, PSB, HDFC Bank, Axis Bank, ICICI Bank, and Yes Bank; during the period 2009/2010 to 2017/2018. |
URI: | https://www.um.edu.mt/library/oar/handle/123456789/120782 |
Appears in Collections: | Scholarly Works - FacEMAIns |
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