Asset Quality Management in Indian Commercial Banks

Abstract

newline Indian Banking sector has undergone a paradigm shift in the past two decades right newlinefrom the transition of the manual banking operation to the automated banking, newlineembracing the advent of technological up gradation but without any spectacular newlineimprovement in the Asset Quality Management. Poor Asset Quality in addition to newlinedecreased profitability and liquidity crunch also resulted in high and unending risk in newlinethe banking sector as per Banking Stability Indicator, December 2016. The core newlineobjective of the study is to examine the status of the Asset Quality of the commercial newlinebanks, tracing the factors attributable towards persistent upward movement in NPAs, newlineanalyzing the impact of Asset Quality deterioration on the financial performance of newlinethe banks, on the Market Value Added of the shareholders, efficacy of the recovery newlinechannels and finally exploring the relevance of professionals, CMAs role in the newlinebanking premise towards NPA mitigation. The analysis was done on the basis of both newlineprimary data and secondary data by using the apt statistical tools namely, Mixed newlineModel, Step Wise Regression, Linear Regression, Principal Component Analysis, F test and Mann Whitney U test in R software and SPSS Version 23 besides simple tools newlinelike Students t test, Correlation, Coefficient of Variation, Sensitivity analysis in newlineMicrosoft Windows (Version 2007). The study revealed that Asset Quality newlinedeterioration in the name of GNPA ratio, NNPA ratio and SA ratio is more severe in newlinePublic sector banks followed by SBI and Associates and Private sector banks. NPA newlinegrowth can be blamed due to voluminous existence of defaulters more prominently in newlineSBI and Associates in contrast with other categories of banks. With respect to newlinemacroeconomic factors, namely Exchange rate typically impacted the Public sector newlinebanks and SBI and Associates, in case of Public sector banks, the GDP rate and Repo newlinerate also impacted the GNPA ratio,CPI and Repo rate influenced the Private sector newlinebanks GNPA ratio.Among the bank specific ratios, both the Public and Private