MEASURING NPA (NON-PERFORMING ASSETS) LEVELS AND ITS IMPACT ON PROFITABILITY IN HDFC BANK AND ICICI BANK

Abstract

The banking sector plays a crucial role in the economic development of a country by mobilizing savings and providing credit to various sectors of the economy. One of the major challenges faced by banks in recent years is the rising level of Non-Performing Assets (NPAs). Non-Performing Assets represent loans or advances on which the borrower fails to make interest or principal repayments for a specified period. High levels of NPAs adversely affect the profitability, liquidity, and financial stability of banks. Therefore, effective management of NPAs has become an important concern for banking institutions.This study focuses on measuring the levels of Non-Performing Assets and analyzing their impact on the profitability of two major private sector banks in India, namely HDFC Bank and ICICI Bank. The research examines how NPAs influence financial performance indicators such as net profit ratio, return on assets, and overall financial efficiency. The study mainly relies on secondary data collected from annual reports, financial statements, and reports published by the Reserve Bank of India.The analysis highlights the trend of NPAs in both banks and evaluates how efficiently they manage credit risk and loan recovery. The study also identifies the relationship between NPA levels and profitability of the banks. The findings of the research provide useful insights into the importance of effective credit management practices in maintaining financial stability and improving profitability in the banking sector.