Remedies of Non-performing assets on commercial banks in India

The present study reveals Commercial banks in India are facing the problem of Non-Performing Assets (NPAs). The earning capacity and profitability of the banks are highly affected because of the existence of NPAs. Moreover the non-performance or non-receipt of interest and principal blocked banks money in the form of funds and its not available for further use of banking business and thus the profit margin of the banks goes down. As per the prudential norms suggested by the Reserve Bank of India (RBI), a bank cannot book interest on an NPA on accrual basis. In other words, such interests can be booked only when it has been actually received. Therefore, this has become what is called as a ‘critical performance area’ of the banking sector as the level of NPAs affects the profitability of a bank.