How NPA Affects The Profitability Of Indian Bank

Abstract

Managing NPAs help the banks to maintain its liquidity and profitability and improper NPA management lead to banking failures. The risk factor associated with NPAs induce banks to incline towards other low risk investments, in no ways it is suitable for the development of an economy. If the loan borrowers fail to repay the money, it will affect the interest income of the banks. Thus, the profitability of the bank may get hit with the categories of doubtful and bad debts. Other disadvantages include reduced return on investments (ROIs) and increasing loan interest rates. Present study evaluates the impact of NPAs on the stability of some Indian banks. If a bank has a high NPA ratio, its efficiency is deemed lower than the low NPA. This has a detrimental effect on the bank 's reputation and equity.