NPA in Banking Sector in Post-Reform Period: An Empirical Study of Andhra Bank

The overall development of the economy generally depends on its banking sector and its stability in the functioning. Non-performing assets (NPAs) are one of the foremost concerns for banks in India. NPAs generally reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults by which the profitability of the bank is got effected. In a developing country, banking is seen as an imperative mechanism of development, where NPAs are playing a crucial role in the growth of the economy. NPAs are not merely nonremunerative, but they add cost to the credit management. The NPA growth involves the necessity of provisions, which reduces the overall profits and shareholders’ value. The problem of NPAs is not only affecting the banks but also the whole economy. In this regard, the present paper is an attempt to analyze the impact of NPAs on profitability of public sector banks especially Andhra Bank with a comparative analysis of these two.