Impact of Non-Performing Assets on the Profitability of Banks

Non-performing Asset is a “termite” for the banking sector. Non-performing Asset is a vital factor to examine the financial performance of a bank. It affects liquidity and profitability of the bank largely; in addition, it also poses a threat to the quality of asset and survival of banks. Non Performing Assets show the competence of the performance of the banks. Non Performing Assets means which amount is not received by the bank in return of loans disbursed. Thus, a study has been done on all banks ownership wise in India to evaluate the effect of Non Performing Assets on the profitability of banks. Banks today are not judged only based on number of branches and volume of deposits but also based on standard of assets. NPAs negatively affect on the profitability, liquidity and solvency of the banks. This paper analyses the circumstances of NPAs in banks namely State Bank of India (SBI), Nationalized Bank, Private Bank and Foreign Bank. Four Banks selected on basis of ownership for the study the relation between Gross NPA and Net Profit of banks. In this paper is applying correlation. The result shows that all the other banks exhibit a negative correlation between their gross Non Performing Assets and net profits. This study based upon secondary data recovered from Report of Progress of banking in India, Websites, Journals and Articles. The scope of the study is limited to analysis of nonperforming assets of public sector banks covering the period of 2014-2017.