PROFITABILITY AND CREDIT CULTURE OF NPAS: AN EMPIRICAL ANALYSIS OF PSBs

Abstract

Post reform era has changed the whole structure of banking sector of India. The emerging competition has resulted in new challenges for the Indian banks. Hence, parameters for evaluating the performance of banks have also changed. This paper provides an empirical approach to the analysis of profitability indicators with a focal point on non-performing assets (NPAs) of commercial banks in the Indian context. The paper discusses NPA, Factors contributing to NPA, Magnitude and Consequences. By using analytical perspective, the paper observed that NPAs affected significantly to the performance of the banks in the present scenario. On the other hand, factors like better credit culture, managing the risk and business conditions which lead to lowering of NPAs. The empirical findings using observation method and statistical tools like DEA, correlation, regression and data representation techniques, identified that there is a negative relationship between profitability measure and NPAs.

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