Management and Control of Non Performing Assets (NPA) in Indian Public Sector Banks

12 Pages Posted: 26 Nov 2016

See all articles by Dr. S K Misra

Dr. S K Misra

Dr B R Ambedkar National Insitute of Technology; Punjab Technical University

Parvesh Aspal

Punjab Technical University, Jalandhar; Punjab Technical University, Jalandhar

Date Written: November 1, 2011

Abstract

India’s legal system has traditionally been friendly towards borrowers and famously inefficient and slow in the recovery of loans and interest. As a result, once a bank provides a loan or advance to a borrower, it has very little bargaining power in terms of calling the loan back or getting its hands on assets that formally securitize that particular loan or advance. In India, the whole banking sector and particularly the public sector banks till recently suffered from considerable amount of non-performing assets (NPAs). The paper studies the effectiveness of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 in controlling and solving the problem of non-performing assets of public sector banks. The study found that NPAs in public sector banks have been declining continuously from Rs. 56,156.43 crores (10.67% of Gross Advances) in 2001-2002 to Rs. 55,171.48 crores (2.31% of Gross Advances) in 2009-2010 since the implementation of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act. There is a decline of 80.10% in non performing assets in public sector banks as a whole during the period of study. The study revealed that the enactment of SARFAESI Act was highly successful and effective in reducing and controlling the amount of non- performing assets of public sector banks. The study also recommends Indian public sector banks should continue to remain focused in their recovery efforts of non-performing assets, in order to maintain the positive and effective trend of improving the quality of their assets.

Keywords: Bank credit, Gross advances, Non-performing Assets, SARFAESI

Suggested Citation

Misra, Sushendra Kumar and Aspal, Parvesh, Management and Control of Non Performing Assets (NPA) in Indian Public Sector Banks (November 1, 2011). Available at SSRN: https://ssrn.com/abstract=2875378 or http://dx.doi.org/10.2139/ssrn.2875378

Sushendra Kumar Misra (Contact Author)

Dr B R Ambedkar National Insitute of Technology ( email )

NH 1
Jalandhar, 144011
India
9478098010 (Phone)

HOME PAGE: http://www.nitj.ac.in

Punjab Technical University ( email )

Jalandhar-Kapurthal Road
Kapurthala, 146001
India
919478098010 (Phone)
911822662530 (Fax)

HOME PAGE: http://ptuaccounts.ac.in

Parvesh Aspal

Punjab Technical University, Jalandhar ( email )

Jalandhar - Kapurthala Highway
Kapurthala
Punjab, Jalandhar, Punjab
India
9478098032 (Phone)

Punjab Technical University, Jalandhar ( email )

Jalandhar - Kapurthala Highway
Kapurthala
Punjab, Jalandhar, Punjab
India
9478098032 (Phone)

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