Head of Department

Department of Commerce,

R.K. Arya College, Nawanshahr

 Punjab, India 

Banga, Punjab, India

Abstract
The money blocked in bad loans is not available for productive use and adverse effect on banks' profitability is there. Government of India took various legal steps for solving the problem of NPAs. A reducing trend in NPAs of banks is witnessed since the performance of new legislative measures in 2002. Given the current socio-political situation in the country, such hard legislations are required to bring down the level of NPAs. The study discusses the theoretical composition of NPAs and it also highlights the trends, status and recovery channels of NPAs in the Indian scheduled commercial banks such as Public sector, Private sector and Foreign sector banks. The data taken in this study are mainly secondary in nature. The main source of data has been the website of Reserve Bank of India. The main objective of the study is to management of the problem of NPAs in commercial banks, their trends and gives suggestions for reducing the level of NPAs.
Key words: Assets, Provisions, Tribunal, Banking, Loans.                     
“Management of NPAs: A Study of Indian Scheduled Commercial Banks”
Introduction:
Indian commercial banks play an important role in the economic development of the country, by providing financial assistance to various sectors. Non-Performing Assets (NPAs) shows the actual working of commercial banks. More NPAs shows the large number of credit defaults that affect the net-worth of the commercial banks. The problem of NPAs is faced by all Banks in the world. If necessary action will not taken regarding this than survival of banks looks difficult in future. For the survival of the banking system in the economy, the level of NPAs should be reduced. The Problem of Non-Performing Assets is the main area of concern, as they adversely affect the financial working of the banks.
The main focus of the study is to examine the trends of Non-Performing Assets of Scheduled Commercial Banks for the period of last six years (2016-17 to 2021-22). The paper discusses the theoretical structure of NPAs and it also highlights the trends, status and recovery channels of NPAs in Indian commercial banks. The data taken in this study are mainly secondary in nature. The main source of data has been the website of Reserve Bank of India. The main objective of the study is to management of the problem of NPAs in commercial banks, their settlements & recovery through various channels and gives suggestions for reducing the level of NPAs.
The concept of settlement of dues between the banks and its creditors through Lok -Adalats has taken off in a big way. This has led to decline in the level of NPAs of the Indian banking sector. Public Sector banks don’t take dominant possession for the reduction of NPAs in compare to other Sector banks. The NPAs in commercial banks are growing due to external as well as internal factors. There are different reasons behind this like inappropriate SWOT analysis non remittance of recoveries to various financing agencies, tribunal willful defaults, natural calamities, and industrial sickness, lack of demand change on Govt. policies, unsuitable technology, managerial deficiencies, poor credit assessment system and re-loaning of the same having already affected.
NPAs Classification:
Gross NPAs: Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on Balance Sheet date. Gross NPAs reflects the quality of the loans made by banks. It includes of all then on standard assets like as sub-standard, doubtful, and loss assets. Substandard Assets which remains as NPAs for less than or equal to 12 months, Doubtful Assets which remained in the above category for 12 months and Loss Assets: Assets where loss has been identified by the bank or the RBI, however, there may be some value remaining in it. Therefore loan has not been not completely written off.
Net NPAs: Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs. Net NPAs shows the actual trouble of banks. Since in India, bank balance sheets contain a huge amount of NPAs and the process of recovery and write off of loans is very time consuming, the provisions the banks have to make against the NPAs according to the central bank guidelines, are quite significant.
Review of Literature
Selvarajan, B & Vadivalagan, G. (2013) studied that the problem of NPA is not limited to only Indian public sector banks, but it prevails in the entire banking industry. Major portion of bad debts in Indian Banks arose out of lending to the priority sector at the dictates of politicians and bureaucrats. If only banks had monitored their loans effectively, the bad debt problem could have been contained if not eliminated. The paper highlights the necessity and the nature of the non-performing assets in Indian Bank, Tamil Nadu. Finding out Non Performing Assets –NPA- under the Priority sector lending in Indian Bank and Compare with Public Sector Banks and making appropriate suggestions to avoid future NPAs and to manage existing NPAs in Indian Bank are the other major objectives of this study. The scope of this study covers on the basis of measuring for the banks to avoid future NPAs & to reduce existing NPAs, guiding for the government in creating & implementing new strategies to control NPAs, and selecting appropriate techniques suited to manage the NPAs and develop a time bound action plan to reduce the growth of NPAs.
Bagadi, B. (2020) this paper explores the macro-financial linkages and micro-level sources underlying the asset quality deterioration. In line with the ongoing international intellectual discourse, this paper finds the evidence of pro cyclicality in the Indian context as reflected in past credit boom-bust episodes as well as economic and interest rate cycles. Anemic external macroeconomic situation post-crisis, high inflation and dwindling asset prices have eroded the debt servicing capacity of borrowers and contributed to the asset quality problems. Sectoral analysis demonstrates rising incidence of loan defaults in infrastructure, particularly power, retail, SSIs and agriculture, across bank groups. Asset quality could come under greater strains, given the weakening economic backdrop and global headwinds, impinging on the soundness of banks and macro financial stability. In its latest Financial Stability Report, the RBI had raised concerns that banks’ NPAs could rise to 9.9% of their advances by September this year from 9.3% at present. But experts believe it could be much more than that. Already saddled with bad loans, the state-owned lenders’ strength of the loan book has been completely damaged as they are pre-occupied with the merger process.
Present senario of NPAs in Indian Scheduled Commercial Banks:
To have proper understanding of the problem of NPAs, the information regarding magnitude and trends of NPAs in Indian scheduled commercial banks is presented in the following tables.
Table-1 showed the trends of Gross and Net NPAs in Public Sector Banks for the period 2016-17 to 2021-22. Both gross and Net NPAs showed a fluctuating trend. In 2016-17 gross NPAs of public sector banks were Rs. 6,84,701crore and in 2021-22 it reduced to Rs. 5,42,174 crore whereas Net NPAs are Rs. 3,83,101 crore to Rs. 1,54,745 crore in the study period. Percentage of Gross NPAs of Gross Advances in 2016-17 was 11.7% and in 2021-22, it reduced to 7.3%. Similarly percentage of Net NPAs of Net Advances reduced to 2.2% in 2021-22 which was 6.9% in 2016-17. It showed that government of India taken proper steps for the improvement in the efficiency of Public sector to reduce the level of NPAs. Gross and Net NPAs declined in absolute terms from the year 2017-18 onwards because of better recovery channels. With the advancement of technology and better recovery tools Public Sector banks used secured loan policy to reduce the level of NPAs. 

Table-1
Gross and Net NPAs in Public Sector Banks (Amount in Rs. Crore)

Years	Gross NPAs	Gross NPAs as %age of Gross Advances	Net NPAs	Net NPAs as %age of Net Advance
2016-17	6,84,701	11.7	3,83,101	6.9
2017-18	8,95,601	14.6	4,54,473	8.0
2018-19	7,39,541	11.6	2,85,122	4.8
2019-20	6,78,317	10.3	2,30,918	3.7
2020-21	6,16,616	09.1	1,96,451	3.1
2021-22	5,42,174	07.3	1,54,745	2.2

Source: Annual accounts of banks and Report on Trend and Progress of Banking in India
Table- 2 shows the trends of Gross and Net NPAs in Private Sector Banks for the period 2016-17 to 2021-22. The Gross NPAs in 2016-17 was Rs. 93,201crore increased to Rs. 1, 80,782 crore in 2021-22. Net NPAs showed a fluctuating trend during the study period. In 2016-17 Net NPAs of private sector banks was Rs. 47,810 crore and it reduced Rs. 43,733 crore in 2021-22. Percentage of Gross NPAs of Gross Advances in 2016-17 is 4.1% and in 2021-22, it reduced 3.8%. Table showed that the percentage of Net NPAs to Net Advances reduced to 1% in 2021-22 which was 2.2% in 2016-17. The data showed that the private sector banks were not successful to reduce the level of NPAs due to the carelessness of granting loans and lack of proper documentation at the time of sanctioning loans.
Table-2
Gross and Net NPAs in Private Sector Banks (Amount in Rs. Crore)

Years	Gross NPAs	Gross NPAs as %age of Gross Advances	Net NPAs	Net NPAs as %age of Net Advance
2016-17	93,201	4.1	47,810	2.2
2017-18	1,29,335	4.7	64,380	2.4
1018-19	1,83,604	5.3	67,309	2.0
2019-20	2,09,568	5.5	55,683	1.5
2020-21	1,97,508	4.9	55,809	1.4
2021-22	1,80,782	3.8	43,733	1.0

Source: RBI Reports on Trend and Progress of Banking in India 
Table 3 highlights that gross NPAs of Foreign Banks showed a fluctuating trend.  Gross NPAs in 2016-17 was Rs. 13,601 crore increased to Rs. 13,786 crore in 2021-22. In 2016-17 Net NPAs of FBs banks was Rs. 2,101 crore and it increased to Rs. 3,023crore in 2021-22. Percentage of Gross NPAs of Gross Advances in 2016-17 was 4% and in 2021-22 it reduced to 2.9%. And percentage of Net NPAs of Net Advances is same i.e 0.6% in the study period. The data shows that the overall both Gross and NPAs of FBs was increased. The FBs are facing this problem of NPAs due to unequal laws of recovery tools in different Nations.

Table-3
Gross and Net NPAs in FBs (Amount in Rs. Crore)

Years	Gross NPAs	Gross NPAs as %age of Gross Advances	Net NPAs	Net NPAs as %age of Net Advance
2016-17	13,601	4.0	2,101	0.6
2017-18	13,849	3.8	1,548	0.4
2018-19	12,242	3.0	2,051	0.5
2019-20	10,208	2.3	2,005	0.5
2020-21	15,044	3.6	3,241	0.7
2021-22	13,786	2.9	3,023	0.6

Source: Annual accounts of banks and Report on Trend and Progress of Banking in India
Table 4 depicts that both gross and Net NPAs in SFBs showed a fluctuating trends. Gross NPAs in 2016-17 was Rs. 3010 crore increased to Rs. 6,911 crore in 2021-22. In 2016-17 Net NPAs of SFBs was Rs. 102 crore and it increased to Rs. 2,725 crore in 2021-22. This shows that in these banks NPAs increased at very high rate because of state government’s policy of carelessness in this part of recovery of loans due to political influence in primary sector lending etc. Percentage of Gross NPAs of Gross Advances in 2021-22 was 4.9%. And percentage of Net NPAs of Net Advances was 2%. The study shows that the overall both Gross and NPAs of SFBs was increased. These banks are required to take proper steps to reduce the level of NPAs with the help of state government.
Table-4
 Gross and Net NPAs in SFBs (Amount in Rs. Crore)

Years	Gross NPAs	Gross NPAs as %age of Gross Advances	Net NPAs	Net NPAs as %age of Net Advance
2016-17	3,010	-	102	-
2017-18	8,940	-	437	-
2018-19	1,087	1.7	586	1.0
2019-20	1,709	1.9	765	0.8
2020-21	5,971	5.4	2,981	2.7
2021-22	6,911	4.9	2,725	2.0

Source: Annual accounts of banks and Report on Trend and Progress of Banking in India
Table 5 shows the trends of All Indian Scheduled Commercial Banks for the period 2016-17 to 2021-22. In 2016-17 gross NPAs of All SCBs were Rs. 7,918,101 crore and in 2021-22 it reduced to Rs. 7,43,653 crore similarly Net NPAs are Rs. 4,33,110 crore in 2016-17 and reduced to Rs. 2,04,226 crore in 2021-22, which shows the better working of all SCBs in the study period. Percentage of Gross NPAs of Gross Advances in 2016-17 was 9.3 % and in 2021-22, it reduced to 5.8%. The percentage of Net NPAs of Net Advances reduced to 1.7% in 2021-22 which was 5.3% in 2016-17. It shows the improvement in the efficiency of All SCBs to reduce the level of NPAs. Gross and Net NPAs all SCBs declined in absolute terms from the year 2016-17 onwards because of better recovery measures adopted by the government of India. The moderation in GNPAs ratios of banks that began in 2019-20, continued during the period under review to reach 5.8 per cent by end-March 2022. During 2021-22, this improvement was driven by lower slippages, partly due to the asset classification standstill. With the decline in delinquent assets, their provision requirements also dropped and the net NPAs ratio of PSBs and PVBs reduced from the previous year. On the opposing, FBs reported increasing accretions to NPAs and weakening asset quality due to amalgamation of a concerned Private Sector Banks with FBs.
Table-5
Gross and Net NPAs in All SCBs (Amount in Rs. Crore)

Years	Gross NPAs	Gross NPAs as %age  of Gross Advances	Net NPAs	Net NPAs as %age of Net Advance
2016-17	7,918,101	9.3	4,33,110	5.3
2017-18	10,39,679	11.2	5,20,838	6.0
2018-19	9,36,474	9.1	3,55,068	3.7
2019-20	8,99,803	8.2	2,89,370	2.8
2020-21	8,37,771	7.3	2,58,228	2.4
2021-22	7,43,653	5.8	2,04,226	1.7

Source: Annual accounts of banks and Report on Trend and Progress of Banking in India
Table-6 reveals that the standard, substandard, doubtful and loss assets of commercial banks in absolute terms over the years. It shows that after implementation of the banking sector reforms and recommendations of the various Committees reports on Financial System, standard assets of commercial banks increased from Rs. 68, 624,11 crore  in 2016-17 to Rs. 1,11,55,849 crore in 2021-22. This is a positive trend for the banking sector, as returns on standard assets constitute the major chunk of profits of banks. Increase in the proportion of standard assets as a percentage of total advances also signifies a decline in share of NPAs in total advances, as is evident from the table. Further, the substandard assets and doubtful assets have also shown a declining trend, i.e., from Rs. 1, 92,501 crore to Rs. 1, 25,782 crore and from Rs. 5, 11,410 crore to Rs. 4, 16,519 crore respectively over the study period. But loss assets were Rs. 24,712 crore in 2016-17 and were increased to Rs. 1, 55,243 in the given period shows a worry for banks. However, growing share of doubtful debts in total NPAs indicates that major chunk of NPAs are hard to recover, but not impossible. This is, indeed, a great cause of concern for the Indian banking industry.

Table-6
Classification of Loan Assets by Commercial Banks (Amount in Rs. Crore)

Year	Standard Assets	Sub-Standard Assets	Doubtful Assets	Loss Assets
2016-17	68,624,11	1,92,501	5,11,410	24,712
2017-18	74,02,152	2,36,374	6,71,957	53,398
2018-19	86,46,745	1,83,726	6,19,567	76,894
2019-20	92,58,114	1,93,413	5,03,543	1,43,349
2020-21	98,60,726	1,77,720	4,47,648	1,54,717
2021-22	1,11,55,849	1,25,782	4,16,519	1,55,243

Source: Annual accounts of banks and Report on Trend and Progress of Banking in India
Table-7 provides the data showing number of Non-Performing Assets cases settled through various recovery channels. The table shows that average value of total NPAs cases settled through all recovery channels is Rs. 83997.5 crore during the period 2016-17 to 2021-22. Average values of such cases settled through Lok Adalats, DRTs, and SARFAESI Act and IBC are Rs. 2494.67 crore, Rs. 9716.67crore, Rs. 30083.83 crore and Rs. 50043 crore respectively during the study period. It shows the efficiency of these channels in the recovery of NPAs.
Table -7
No. of Recovery of Cases Settled through Various Channels (Amount in Rs. Crore)

Year	Lok Adalats	DRTs	Sarfaesi Act	National Company Law Tribunals under IBC	Total
2016-17	2,300	10,300	25,900	-	38,500
2017-18	1,811	7,235	26,380	4,926	40,352
2018-19	2,750	10,552	38,905	66,440	1,18,647
2019-20	4,211	9,986	34,283	1,04,117	1,52,597
2020-21	1,119	8,113	27,686	27,311	64,228
2021-22	2,777	12,114	27,349	47,421	89,661
Average	2494.67	9716.67	30083.83	50043	83997.5

Source: RBI Report on Trend and Progress of Banking in India, various issues.
Some Suggestions to Reduce NPAS:
Following are the suggestions for reducing Non-Performing Assets:
1. In order to reduce NPAs, the banks should take enough care in selection of the borrower. Hence, it is suggested that the bank should perform an in-depth investigation about the creditworthiness of the borrowers.
2. After sanctioning the loan, banks do not take regular follow up of the advances. To reduce the level of NPAs, banks should be pro-active in recognizing bad loans. This work will definitely help the banks in reducing the NPAs in their respective bank.
3. The banks should publish the names of loan defaulters in the local news papers with due loan amounts. It affects the self-respect of such defaulter and there are chances that they may repay the amount of NPAs.
4. Bank also required checking the creditworthiness of the brewers from his previous trade dealings and solvency. With the help of this scheme bank can take instant steps as and when some negative points about the loan taker is received from the market.
5. The bank should also reduce NPAs by giving some relief to the borrowers such as the defaulters are given a special interest discount if they make the without delay repayment of the outstanding amount.
6. It is suggested that bank should establish a special recovery department to recover the outstanding amount of NPAs. This recovery department is accountable to recover the outstanding loans.
7. It is also suggested that banks should adopt the government legislation in the direction of effective recovery of outstanding loans.
8. The NPAs of those banks which are not successful to control them may be transferred to state owned Asset Reconstruction Fund (ARF), operated by an independent private sector organization.
Conclusion:
The problem of Non-Performing Assets (NPAs) has always weakening the Indian banking sector. The main reason of high percentage of NPAs is the improper management and low capability of loan department of the banks, which deteriorates the qualitative aspect of lending. The other reasons include willful defaults, ineffective supervision of borrows accounts and lack of use of recent technical and managerial expertise. NPAs put direct impact on the profitability, capital adequacy ratio and credibility of banks. It has also been observed that the various legal measures used by the government are not successful in reducing NPAs. Similarly prudential and provisioning norms and other initiatives taken by the regulatory bodies have been active to put pressure on the banks to improve their performance by way of trimming down NPAs. Overall all Indian commercial banks able to reduce the NPAs level but still more efforts are required for survival in the financial market. In 2016-17 gross NPAs of All SCBs were Rs. 7,918,101 crore and in 2021-22 it reduced to Rs. 7,43,653 crore similarly Net NPAs are Rs. 4,33,110 crore in 2016-17 and reduced to Rs. 2,04,226 crore in 2021-22, which shows the better working of all SCBs in the study period. Percentage of Gross NPAs of Gross Advances in 2016-17 was 9.3 % and in 2021-22, it reduced to 5.8%. The percentage of Net NPAs of Net Advances reduced to 1.7% in 2021-22 which was 5.3% in 2016-17. It shows the improvement in the efficiency of All SCBs to reduce the level of NPAs. Gross and Net NPAs all SCBs declined in absolute terms from the year 2016-17 onwards because of better recovery measures adopted by the government of India.  During 2021-22, this improvement was driven by lower slippages, partly due to the assets classification. With the decline in delinquent assets, their provision requirements also dropped and the net NPAs ratio of Public sector and Private sector banks eased from the previous year. On the contrary, FBs reported increasing accretions to NPAs and deteriorating asset quality due to amalgamation of a concerned Private Sector Banks with FBs.
The trends of both Gross and Net NPAs have also declined over time. This shows that the levels of NPAs in Indian commercial banks have come down significantly. This is also supported by the fact that the NPAs (both gross and net) as per cent of Gross advances as well as total assets are declining over time.
Indian government took various initiatives to reduce the level of NPAs. Present study is showing that the number of average value of total NPAs cases settled through all recovery channels is Rs. 83997.5 crore during the period 2016-17 to 2021-22. Average values of such cases settled through Lok Adalats, DRTs, and SARFAESI Act and IBC are Rs. 2494.67 crore, Rs. 9716.67crore, Rs. 30083.83 crore and Rs. 50043 crore respectively during the study period. It The NPAs level of our banks is still high as compared to the international standards. It is really impossible to have zero percentage NPAs. It is needless to mention that a lasting solution to the problem of NPAs can be achieved only through proper credit assessment and risk management mechanism. It is necessary that the banking system is to be equipped with prudential norms to minimize the problem of NPAs. The onus for containing the factors leading to NPAs rests with banks themselves. This will necessitate organizational restructuring, improvement in the managerial efficiency and skill up gradation for proper assessment of credit worthiness. One cannot ignore the fact that a part of the reduction in NPAs is due to the writing off bad loans by the banks. The Indian banks should take care to ensure that they give loans to creditworthy customers as prevention is always better than cure. While granting loans banks should take care of the National Interest and adopt secure loan policy.  
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