The Indian banking sector has been facing serious problems of raising Non-Performing Assets (NPAs)1. The growth of NPAs has a direct effect on the profitability of financial institutions. It continues to be expressed from every corner that there has rarely been any systematic evaluation of the best way of tackling the problem. There seems to be no unanimity in the proper policies to be followed in resolving this problem. NPAs reflect the performance of financial institutions. A high level of NPAs indicates a high probability of a large number of credit defaults that affect the profitability and net-worth of financial institutions and also scrape away the value of the asset. NPAs affect the liquidity and profitability also posing threat on quality of asset and survival of financial institutions. The problem of NPAs is not only affecting the financial institutions but also the whole economy. In fact, a high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade2. It is necessary to reduce NPAs to improve the financial health of the financial system. An attempt is made by the researcher to understand NPA, the status and trend of NPAs in DFIs, The factors contributing to NPAs, reasons for high impact of NPAs on DFIs in India and recovery of NPAS through various channels.

1 Economic Survey 2016-17. “Chapter: 4 The Festering Twin Balance Sheet Problem” Government of India, Ministry of Finance, Department of Economic Affairs, Economic Division (January 2017). p.82. Retrieved from http://finmin.nic.in/indiabudget2017-2018/es2016-17/echapter.pdf.Accessed on 7 May, 2017.

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2 Singh, V.R., (March 2016), “A Study of Non-Performing Assets of Commercial Banks and It’s Recovery in India”, Annual Research Journal of SCMS, Pune, Vol.-4, pp. 110-125. Retrieved from: https://www.scmspune.ac.in/chapter/2016/Chapter%209.pdf