International Research Journal of Commerce , Arts and Science

 ( Online- ISSN 2319 - 9202 )     New DOI : 10.32804/CASIRJ

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IMPACT OF ASSET QUALITY ON FINANCIAL PERFORMANCE OF BANKS IN INDIA: A COMPARATIVE STUDY OF PUBLIC AND PRIVATE SECTOR BANKS

    2 Author(s):  DR. V. RICHARD PAUL, PRAKASH.N

Vol -  10, Issue- 7 ,         Page(s) : 39 - 50  (2019 ) DOI : https://doi.org/10.32804/CASIRJ

Abstract

Lending and investments is an essential function of banks. Several risks arise in the course of the banking operations and an important one is the credit risk. Credit risk is a part and parcel of lending and investment function of banks. How well the credit risk is managed by a bank is demonstrated by the quality of the assets in its books. In India, the quality of assets of banks has received an added attention especially after the global financial crisis of 2007-08. The slowdown in the industrial and commercial activities caused by the crisis has severely impacted the servicing of debts by the borrowers. This has led to the deterioration in the quality of the loan book of banks thus affecting their financial performance. The volume of bad loans has touched alarming levels in many banks even threatening their existence and the Reserve Bank of India has put them under Prompt Corrective Action. The current study spanning a period of ten years from FY 2005 to 2014 is intended to analyse the impact of the Asset Quality on selected financial parameters such as efficiency, liquidity, profitability and solvency of public and private sector banks. Fourteen different ratios have been used under these broad parameter in the study. This study has applied the census method of sampling involving 46 banks of which 26 are public sector banks and 20 private sector banks. The data for the study has been primarily sourced from the Reserve Bank of India. The study has used descriptive statistics, correlation analysis, trend analysis, factor analysis, regression analysis and Anova and the results of the study is presented here.

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