Analyzing the Effect of Non-performing Assets on Profitability: A Study of Indian Public Sector Banks

This research paper, “Analyzing the Effect of Non-Performing Assets on Profitability: A Study of Indian Public Sector Banks,” looks at the relationship between non-performing assets (NPAs) and profitability in the context of Indian public sector banks. The correlation and regression models used in this study are used to evaluate the return on assets (ROA) and return on equity (ROE), two critical profitability indicators. The study’s main goal is to figure out how profitability and NPA relate to one another. In order to achieve this, the study examines both general economic factors like GDP and inflation rates and data specifically related to banks like GNPA and NNPA. The analysis’s findings indicate a significant negative correlation between non-performing assets (NPAs) and profitability metrics (ROA and ROE), proving that higher NPA levels are linked to lower profitability in the chosen Indian public sector banks. Regarding issues specific to banks, GNPA, but not NNPA, has a significant detrimental effect on profitability. In the case of the 12 Indian public sector banks under investigation, economic factors like the GDP growth rate and the inflation rate don’t appear to have a substantial direct impact on the relationship between NPA and profitability.