Introduction to Impact on Non Performing Assets Commercial Banks:

Public and private sector banks profitability, liquidity and also competitive functioning are been affected by the non performing assets and as a result the psychology of the bankers will also affected by NPAs who are depositing towards the credits as well as in the expansion of credits.

The Non-performing assets Impact on profitability

Commercial banks from the year 1993 to 2001 have been incurring an entire amount of Rs. 31251 crores towards provisioning non performing assets. By incurring this amount the net non performing assets brought up by Rs. 32632 crore or in the other words it 6.2 percent net advances. The huge provision of NPAs combined by grasping cost of those assets of non productive is performed from so many years and has a severe drain on the profitability of PSBs.  In the issues of the nationalized banks regarding equity have been already strikes on the market and in the secondary market are now quoted at the discount. As a substitute this has been forced PSBs to have a loan seriously from the market of debt to built Teir II capital in order to meet rule of the capital adequacy by keeping serious pressure up on the restrictions of their profits (Amaresh Samantaraya, 2007).

The Impact of the Non-performing assets on the outlook of Bankers towards Credit Delivery

In the psychology of the banks in now days is to keep themselves from the risk free operation i.e. zero percentage of risk as well as to go towards the new credit. The credit growth of this type will affect adversely when these growth is compared to the deposits, this will finally result in the low ratio of C/D approximately in between 50% to 54% for the company.

It is obvious that the collateral security presence at the best might change the extension of the credit to productive sectors towards the investments of the real estate, but may not evade the account turning into NPA.  In future the blocked real estate and assets will correspond to the main NPA and illiquid security in this type of proceeds has the continuous inclination towards long period of time. Dead-line is achieved by the nationalized banks of the tunnel as well as their future affluence based up on the critical solution of this suspended threat (Arvind Virmani., 2005).