Non-performing assets of scheduled commercial banks: A sectoral credit and bank group-wise analysis
Indian banking industry acts as a catalyst and pillar of the economic system of the country with its size and mass coverage. The sector consists of 12 public sector banks, 22 private sector banks, 46 foreign banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural co-operative banks in addition to co-operative credit institutions. It caters to the financial needs of all classes of people in India and is a well regulated one. The sector witnessed mergers and acquisitions, disinvestment, greater flow of capital from the government to public sector banks to strengthen their capital base and satisfying the Basel III norms. It turned to innovative banking, digital banking and the formation of small finance banks and payment banks. In spite of the changes in the banking sector and its robust growth, the major challenge is the mounting of non-performing assets. The banks are directed to lend a portion of their credit (mandatory limit) to the priority sector. The increase in non-performing assets normally impacted the profitability and liquidity position of banks. At this juncture an effort is made in this paper to know the non-performing assets attributed from priority sector lending and non-priority sector lending. From the non-performing assets percentages of public sector banks and private sector banks, it is found that both the groups of banks are facing the problem of non-performing assets from priority sector lending and non-priority sector lending and the percentage is very high in public sector banks. There is significant difference in the percentage of non-performing assets from both types of loans made by public sector banks and private banks. Regarding overall non-performing assets of the two bank groups, the difference is found significant and the difference is found insignificant with respect to growth rate in non-performing assets.