NET PERFORMING ASSETS:
A Bank is an institution which handles money and gives other financial services. Banks accept deposits and make loans and earn a profit from the difference in the interest rates which are paid by the customers. The main function of banks is to use their customers money to lend it to others, who would be able to use it to buy houses, start their own businesses or invest in a way that they will be benefited etc.
Banks generate money in the economy by accepting deposits and lending loans. Banks play a very important role in the economic development of every nation. The banking sector plays a large role in channelizing the money from one end to another end. In general there are several challenges opposing the commercial banks in its day to day operations. The main challenge that banks are facing now is the payment of funds in standard assets such as (loan and advances) or otherwise, it will lead to Non-performing assets.
Non-performing assets are referred to an asset, which has been classified by a bank or financial institution as doubtful, as per the rules and regulations that are been framed by the RBI with respect to the classification of assets.
After Liberalization the Indian banking sector developed in many ways. The RBI also took necessary steps to nationalize sufficient amount of commercial banks for providing socio economic services to everyone. The public sector banks have shown tremendous performance as far as the financial activities are concerned. However, the only problem of the public sector banks these days is the increasing level of the non-performing assets which effects the overall functioning and performance of the banks. The level of NPAs is one of the drivers of financial stability and growth of the banking sector.
The banking institutions are a powerful instrument to provide credit. They circulate all the resources of the country by accepting deposits and contribute for the industrial, agricultural and national development. Thus the banking sector plays a very crucial role in the economic development of the country.
The main focus of this study is to analyze the various factors responsible for the NON-Performing assets in MSME sector.
Following are the objectives of this study
· To understand the meaning and nature of Non-performing assets.
· To find out various reasons for the occurrence of the NPA.
· To understand the impacts of NPA on the organization as well as on the banks.
· To know the proper precautions/process that can be taken before lending money to the organizations.
· To know the different steps are being taken by the Indian banking sector to reduce the NPAs.
· To highlight the measures and different strategies followed by the banks for the effective management of NPAs.
· What are the different schemes that governments provide to support MSME sector mainly to those who are affected by the NPAs?