Empirical Analysis of the Impact of Non - Performing Assets, Liquidity and Risk on the Profitability of Public and Private Sector Banks in India

Author(s)

Kanika Soni and Chandan Kumar Tiwari

Affiliations

Symbiosis Centre for Management Studies, NOIDA

Abstract

This study is an attempt to explore the present challenges in Indian banking sector with special emphasis on the rising problem of non- performing assets of the banks in India. For this, net profit ratio was taken as a dependent factor representing the profitability of the banks. Three independent factors were taken into consideration representing different factors affecting the financial performance of banks specifically- Net NPA Ratio, Current Ratio, Capital Adequacy Ratio. A sample size of 10 Indian Banks was taken into consideration, specifically top five public sector banks and top 5 private sector banks on the basis of total assets owned. The financial data taken was of three years i.e. 2016-2018. According to popular literature the Net NPA Ratio and current ratio have a negative relationship with the net profit and the capital adequacy has a positive relationship. The statistical tests that were applied were correlation and regression. Apart from that a graphical analysis of the banks taken as sample size was also done. The results revealed what popular literature states and that is net NPA and current ratios having a significant negative relationship and capital adequacy having a significant positive relationship. The analysis also showed the financial performances of each banks and gave us useful insights on the overall conditions of the private and public sector banks in India

Keywords

NPAs, Current Ratio, Capital Adequacy Ratio, Public Sector Banks, Private Sector Banks

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