Comparative Study of NPA account settlement Impact of The Nationalized Banks

1. Comparative Study of NPA account settlement Impact of The Nationalized Banks A viable, sustainable and strong banking system is crucial for the overall development of the economic structure of a country. The failure of an effective banking system may lead to adverse impacts in various spheres of the economy. Both the Public Sector Banks and the Private sector Banks in India have made considerable contributions in all economic aspects. However, the amount of non-performing assets or NPA in the balance sheet can have a deep impact on the bank’s profitability. As per the directives of RBI, the accounts become non-performing when the loan account is overdue and the bank fails to recover the capital or interest from the capital for over a period of 90 days. Plans to increase productivity

2. Over the past few years, there is a powerful drive going on in the nationalized banks to enhance their profitability. This implies that the PSBs also have to think of improving productivity, which is necessary to survive in the present economic state. The future of the banks lies in the ability of the banks to build good quality assets consistently even in a competitive environment and minimize the NPAs. Competition and consolidation are the two prime factors that will impact the private and public sector banks in future. The effective methods of NPA account settlement can turn out to be the factors dominating the future of the banking system. NPA categories Every bank has to classify all the non-performing assets into three categories, depending on the time frame over which the asset has been in the non-performing stage and the realise-ability of the debts: Doubtful assets Substandard assets Loss assets The detection of the NPAs and the able management of the debts will help the bank to enjoy more financial stability. Impact of NPA on banking systems The level of return on the assets is one of the most significant aspects of the bank’s efficiency. Its high tie for the banks to provide provisions for the NPAs from the present profit ratio. The NPAs can affect the return to the assets in the following ways: Increase in cost of capital Reduction in ROI

3. Fall in the interest income of the banks accounted only on receipt mode. Disturbance in the capital adequacy ratio with the entry of NPA in the calculations Doubtful debts and bad debts add to the loss Limitations in recycling the funds Mismatch in assets and liabilities It's high time to consult the NCLT lawyers Mumbai who can help the banks to regain economic stability. Comparative study Thorough research of the ten years’ data from the top Indian banks like Canara Bank and State Bank of India shows that the banks are making policies that try to contain NPA for improving the profitability and asset quality. HDFC and PNB show superior NPA management systems if you compare them to the systems existing in SMI and ICICI or other private sector banks. The system even supersedes the system of the public sector banks too. The positive trend in NPA control Recent research studies on trends of the non-performing assets in the various private banks of India show that the level of NPAs in the public sector banks is alarming. But it also shows some improvement in the asset quality with a little decline in the NPA percentage. Thus, the studies show that the banks can maintain economic stability if they take timely action against the degradation of the good-performing assets instead of concentrating only on the NPAsAnalytical study A thorough analytical study shows that the NPA of all the nationalized banks is showing an upward trend. Therefore, statistical records also pave the way for the banks to apply better

4. measures for NPA management.