A Review on Role of Macro and Micro Banking Environment on Non-Performing Assets Management

Abstract

In a self-resilient economy, banking system assumes importance in imparting momentum to economic growth and prosperity through mobilization of financial assets. Performance of banks, irrespective of their nature and function, is germane to their asset creation and maintenance capacity. In a neo-liberal regime, radical policy changes have crept into loan mechanism, thereby subjecting the banks to efficiently recover the loans, which is a vital asset for any banking firm. In this context, the authors through intensive review of literature identified micro and macro banking factors responsible for productive NPA management. The macro banking factors refer to the economic environment whereas the micro banking factors refer to the bank and branch-specific factors. The authors identified the critical role of organizational structure, involvement of employees, and organizational efficiency in driving prudent NPA management. The authors have found that the efficiency in managing NPAs differ in public and private banks, which is attributed to involvement of employees.