Understanding the NPA crisis in India

Abstract

The key objectives of this report include the following: 1. Presenting an overview of how the Indian Financial System is structured. 2. A detailed descriptive study of the extent of India NPA problem over a 15-year horizon from 2003-04 to 2019-20, involving: a. Tracking Scheduled Commercial Banks’ performance on gross and net NPA numbers. Changes and trends over the 15-year period and localtrends over three shorter 5-year phases were studied. b. Quantitatively characterising gross and net NPA figures both in absolute terms and in relation to total credit deployed across the different bank groups that comprise Schedule Commercial Banks (Public sector, Private sector, and Foreign Banks) c. Studying the extent of the NPA problem by important sectors d. Analysing various channels of recovery used by banks in the recovery of NPAs. A short note has been presented on their effectiveness. 3. Providing a qualitative account for observed trends and the scope for further research in this area. This study was based primarily on secondary data. Data from the Reserve Bank of India and affiliated databases was analysed quantitatively. A review of existing academic literature, and insights from the RBI’s Annual Financial Stability Reports underpinned the more qualitative and explanatory aspects of this report. Please refer to the REFERENCES section for an exhaustive list of sources referred to as part of this study.