Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

Banking Sector Reforms and NPA: A Study of Indian Commercial Banks – isec

Banking Sector Reforms and NPA: A Study of Indian Commercial Banks

Abstract

The issue of non-performing assets (NPA), the root cause of the recent global financial crisis, has been drawing the attention of the policy makers and academicians alike. The problem of NPAs, which was ignored till recently,has been given considerable attention after liberalisation of the financial sector in India. This exploratory paper examines the trends of NPAs in India from various dimensions and explains how mere recognition of the problem and self-monitoring has been able to reduce it to a great extent. It also shows that public sector banks in India, which function to some extent with welfare motives, have as good a record in reducing NPAs as their counterparts in the private sector. The paper also discusses the role of joint liability groups (JLGs) or self help groups (SHGs) in enhancing the loan recovery rate.

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