Trend of NPAs in public sector Banks: A study of pre and post crisis period

Abstract

An effort has been made to evaluate the impact of crisis on non-performing assets of Public Sector Banks. Secondary data were used in the present study. The secondary data to non-performing assets from 2001–02 to 2011–12 were collected from various issues of RBI Bulletins. The results mainly indicate that Public Sector Banks have high ratio of nonperforming assets in agriculture Sector due to their primary obligation to lend this sector. The impact of crisis was seen in all Public Sector Banks where the non-performing assets were decreased significantly in the pre-crisis period but was increased at higher rate in Allahabad Bank. The government has realized the importance of management and control of NPAs and in that light introduced legislation through the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act), to institutionalize the process of creating value for investors in the Non-Performing Asset Portfolios of banks and financial institutions. During the pre-crisis period level of NPAs were low but during post crisis period level of NPAs increase in all public Sector Banks. But the impact of crisis was seen in SBI, SBOP, Central Bank of India, Indian Overseas Bank, Vijaya Bank and PNB. Information collected through field survey and secondary data was also used and analysed with different statistical tools simple regression and step wise multiple regression.