A Comparative Study of NPA Of Public Sector, Private Sector Banks and Foreign Banks as On March 2022

Abstract

Banks' NPAs affect their finances and health. NPA loans and advances have not been repaid for 90 days or more, preventing the bank from earning interest. Increased NPAs impact the bank's balance sheet and profitability. The bank loses interest income from these bad loans, which is the biggest impact. This lowers the bank's net interest margin, a key profitability measure, and cuts earnings. High NPAs imply credit risk and asset quality. Banks must make more arrangements for NPAs. These provisions reduce the bank's net earnings, decreasing dividends and reinvestment. This can lower investor confidence, hurting the bank's stock performance and market capitalization. As the bank struggles to recover outstanding loans, it may have to allocate resources and people to resolution efforts, reducing operational efficiency and increasing costs. NPAs also threaten bank liquidity. A large NPA portfolio limits the bank's lending capacity and earning interest income. Thus, the bank's loan book growth may decelerate, harming profitability and sustainability. A high NPA ratio might also lower the bank's credit rating, making it harder to acquire cash. All these variables can create a vicious cycle of financial deterioration for the bank, affecting its ability to expand and serve customers. Thus, banks must manage and reduce NPAs to maintain financial stability. This research compares secondary data of NPA of public sector banks, Private sector banks, and Foreign banks. Descriptive and inferential statistics are used to study the objectives and testing of the hypothesis.