Non-Performing Assets and Their Influence on Financial Performance of Public and Private Sector Banks

Abstract

Non-Performing Assets (NPAs) represent a significant concern in the banking sector, impacting financial performance and stability. This article conducts a comprehensive analysis of the effects of NPAs on the financial performance of both public sector banks (SBI, Union Bank of India, and Canara Bank) and private sector banks (HDFC, AXIS, and ICICI) over a ten-year period, from 2012-13 to 2021-22. The research employed regression analysis to investigate the relationship between NPAs and various financial performance indicators, shedding light on the intricate dynamics at play. In addition to regression analysis, this study also employed a wide range of statistical tools including Mean, Standard Deviation, Coefficient of Variation (CV %), and Compound Growth Rate (CGR). These tools are crucial in assessing the extent and direction of the impact of NPAs on key financial metrics, such as profitability, asset quality, liquidity, and capital adequacy. The findings of this research study contribute valuable insights to the understanding of the NPAs' influence on bank financial performance, offering a comparative perspective between public and private sector banks. By quantifying the extent of the impact and the direction of causality, this study provides evidence-based guidance to policymakers, bank executives, and stakeholders in formulating strategies to manage and mitigate the adverse consequences of NPAs on the banking sector. This article presents a holistic examination of the NPAs' implications, bridging the gap in existing literature, and making a noteworthy contribution to the field of banking and finance.