ROLE OF NON PERFORMING ASSETS IN THE RISK FRAMEWORK OF COMMERCIAL BANKS - A STUDY OF SELECT INDIAN COMMERCIAL BANKS

Abstract

Purpose: The purpose of this paper is to provide an insight into the concept of Non-Performing Asset (NPA), a standard criterion for assessing commercial bank credit risk globally. The paper attempts to put forward the means of interpreting credit risk from existing levels of bank NPAs. Further, research highlights the significant steps taken and procedures implemented by major Indian commercial banks, within the public and private sector, towards recovery of loans and advances slipping into the NPA bracket. Design and Methodology: The research for the present paper is based on extensive study of annual publications on performance of public sector and private sector commercial banks by the Indian Banks Association (IBA). Further, annual reports of commercial banks in focus for the year ending March 2012 have been studied towards deciphering the major steps taken by the individual banks towards downsizing their respective NPA levels. Value: The research findings are expected to be of value for the stakeholders of major commercial banks. As the credit risk inherent within an individual bank in turn affects different stakeholders in varying proportions, thus the disclosures and facts forwarded within the present paper will enable them to be proactive in terms of risk assessment and well-informed in their fund-based dealings with the commercial banks.