The required some structural and procedural changes to

The structure of Indian banking system have commercial
banks, private banks and cooperative banks among them commercial banks have for
more than 90 per cent of banking system’s assets. And among the commercial
bank, there are nationalized banks in which the government has majority of
banks shareholding. Another, the State Bank of India (SBI) in which majority of
equity holding is with the Reserve Bank of India and the associate banks of SBI
having majority holding being with State Bank of India. If we combine these
banks together with regional rural banks, the whole constitute the public
sector (state owned) banking system in India.

The banking industry has undergone a quantity of
change after the first phase of economic liberalization in 1991. But before the
phases economic reforms in 1991, there are several other measures were adopted
to increase the efficiency of the banks such as nationalization of 14 banks in
1969 and again nationalization of 6 banks in 1980. But apart from these
measures banks in India are required some structural and procedural changes to solve
the problem of increasing NPAs. Individuals, firms, companies and industrial
houses takes loans and advances from the commercial banks for meeting their various
kind of needs and so because the growth and diversification of business
activities to a large extent depends upon the bank financing, borrowing and
credit facility. the prime duty of banks are to grant loans and advances to
business enterprises for meeting their short-term and long term financial needs
and also grant loans and advances for economic growth and productive purposes.

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the process of lending is quite a risky task on the part of the banks because it
carries credit risk, which means the failure of borrower for paying their dues.
Non-performing Asset also comes under the same categories where borrower is in
default in paying their dues. When an assets turn out to be a NPAs then it
means banks have ceased to generate income on their lending which certainly
affect the further lending process for other productive purposes. Once the
borrower has failed to make interest or principal payments for 90 days, then
the loan amount is considered to be a Non-performing Asset and it require certain
provisioning on that bad loans. At present, level of NPAs and their increasing
trends are the major concerns for the banks. NPAs are the best indicators for
the health of banking industry. NPAs
replicate the piece of performance of banks and a high level of NPAs
suggests high prospects of having a large number of credit defaults which are
affecting the profitability and net-worth of banks and also eroding the value
of their as in the market as well. And also NPAs reflects the
performance of the bank because these are the primary indicators of the credit
risk (Ibrahim & Thangavelu, 2014)


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