IMPACT OF INTERNAL AND EXTERNAL FACTORS OF PUBLIC AND PRIVATE SECTOR BANKS ON PERFORMANCE OF NON-PERFORMING ASSETS

Abstract

The banking system plays a crucial role in mobilizing financial resources and supporting economic development in India. While commercial banks perform the dual function of accepting deposits and extending credit, lending activities inherently involve the risk of default, which may lead to the accumulation of non-performing assets (NPAs). In recent years, rising NPAs have emerged as a major concern for Indian banks, affecting their profitability, liquidity, and overall financial stability. Effective credit risk management has therefore become essential for minimizing loan defaults and ensuring sustainable banking operations. The present research paper aims to examine the impact of credit risk management practices on non-performing assets in Indian commercial banks by analyzing bankers’ perceptions. The study is empirical in nature and is based on primary data collected through a structured questionnaire administered to bankers working in selected public and private sector banks, namely SBI and ICICI, in Visakhapatnam city. The collected data were analyzed using statistical tools with the help of SPSS software. The findings reveal that weaknesses in credit appraisal, monitoring mechanisms, and policy implementation contribute significantly to the growth of NPAs. The study highlights the need for strengthening institutional risk management frameworks and regulatory interventions to mitigate credit risk and enhance the overall performance of the banking sector.