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Journal ArticleDOI

Conundrum of Non-performing Assets Over Two Decades: An Analysis of Punjab National Bank:

29 Jul 2019-Management and labour studies (SAGE PublicationsSage India: New Delhi, India)-Vol. 44, Iss: 3, pp 263-284
TL;DR: In this paper, the authors have empirically established the relationship between financial sector developments and economic growth and highlighted the importance of a healthy and stable banking system in deciding the pace of development of an economy as it boosts mobilization of funds and acts as a catalyst in the country's growth process.
Abstract: Within the broad realm of financial system, the banking system is one of the pivotal integrants as banks form the major part of financial institutions in India as well as worldwide (Gerschenkron, 1962; Jadhav & Ajit, 1996). Through its intermediary activities, it facilitates the exchange of goods and services, stimulates savings and channelizes these to productive investment. A healthy and stable banking system plays a crucial role in deciding the pace of development of an economy as it boosts the mobilization of funds and acts as a catalyst in the country’s growth process. Various researchers have empirically established the relationship between financial sector developments and economic growth (Bhattacharya & Sivasubramanian, 2003; King & Levine, 1993; Levine, 2004; Rajan & Zingales, 1998; C. Singh, 2005). Strengthening of banking system and its regulation has always been one of the central issues for the policymakers in an economy on account of its direct link with the overall economic performance. India is not an exception to it. Financial soundness of banking depends upon its asset quality and in the process of providing financial assistance to the investment projects, banking institutions face inherent risk known as default risk which creates non-performing assets (NPAs). Asset quality revealed in the form of NPAs of a bank is the actual expression of its credit risk management system. The timely information relating to NPAs works as a useful tool in examining the asset quality of banks (Meeker & Gray, 1987). NPAs affect the operative capability of the banks and successively affect the profitability, liquidity and solvency of those banks (Michael, Vasanthi, & Selvaraju, 2006). No doubt, to some extent, deterioration of assets is inevitable, but it is always appreciable if these distressed assets remain at its minimum with the vital contribution of the credit risk management system. Rising NPAs generally lead Management and Labour Studies 44(3) 263–284, 2019 © 2019 XLRI Jamshedpur, School of Business Management & Human Resources Reprints and permissions: in.sagepub.com/journals-permissions-india DOI: 10.1177/0258042X19848238 journals.sagepub.com/home/mls
Citations
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Dissertation
31 Aug 2004

11 citations

Dissertation
01 Jun 2013
TL;DR: In this paper, the authors evaluated the trend in movement of nonperforming assets of public sector banks in India during the period 2000-01 to 2011-12, and also explained the moderating and mediating role of various bank performance and macroeconomic indicators on incidence of NPA.
Abstract: The reforms in Indian banking sector since 1991 is deliberated mostly in terms of the significant measures that were implemented in order to develop a more vibrant, healthy, stable and efficient banking sector in India. The effect of a highly regulated banking environment on asset quality, productivity and performance of banks necessitated the reform process and resulted the incorporation of prudential norms for income recognition, asset classification and provisioning and capital adequacy norms, in line with international best practices. The improvements in asset quality and a reduction in non-performing assets were the primary objective enunciated in the reform measures. In this context, the present research critically evaluates the trend in movement of nonperforming assets of public sector banks in India during the period 2000-01 to 2011-12, thereby facilitates an evaluation of the effectiveness of NPA management in the post-millennium period. The non-performing assets is not a function of loan/advance alone, but is influenced by other bank performance indicators and also by the macroeconomic variables. In addition to explaining the trend in the movement of NPA, this research also explained the moderating and mediating role of various bank performance and macroeconomic indicators on incidence of NPA%%%%School of Management Studies Cochin University of Science and Technology%%%%Cochin University of Science and Technology

10 citations

Posted Content
TL;DR: In this article, the macroeconomic policy response in India after the North Atlantic financial crisis (NAFC) was rapid and the overshooting of the stimulus and its gradual withdrawal sowed seeds for inflationary and BoP pressures and growth slowdown, then exacerbated by domestic policy bottlenecks and volatility in international financial markets during mid-2013.
Abstract: The macroeconomic policy response in India after the North Atlantic financial crisis (NAFC) was rapid. The overshooting of the stimulus and its gradual withdrawal sowed seeds for inflationary and BoP pressures and growth slowdown, then exacerbated by domestic policy bottlenecks and volatility in international financial markets during mid-2013. Appropriate domestic oil prices and fiscal consolidation will contribute to the recovery of private sector investment. Fiscal consolidation would also facilitate a reduction in inflation, which would moderate gold imports and favorably impact real exchange rate and current account deficit.

6 citations

Journal ArticleDOI
TL;DR: In this paper , the authors analyzed the behavioural component with corporate governance lapses for creating a trail and to what extent it can contribute to forensic analysis to help reduce and prevent fraud in the future.
Abstract: Purpose The banking sector requires a major comeback with the series of bank frauds that has shook the nation. The rising non-performing assets (NPAs) and corporate frauds find their roots in the top-level management or executive levels. The purpose of this study to analyse the behavioural component with corporate governance lapses for creating a trail and to what extent it can contribute to forensic analysis to help reduce and prevent fraud in the future. Design/methodology/approach This study is investigative in nature. This study uses case study approach by taking into account the major Advance–NPA–Fraud cases over period of 2010–2022. RBI data for bank advances, NPAs and advances-relate frauds from 2005 to 2019 were studies and interpreted for creating a trend and pattern for the reduction and prevention of frauds. Findings The authors found that behavioural factors and personalities affect the systems and culture of the company, thereby giving a jolt to the corporate governance mechanisms along with various entities like depositors, consumers and shareholders. Practical implications Assessing the behavioural aspects for risk mitigation remains unexplored in the banking sector. The personality dimension can help in contributing to comprehending the mental aspects and the reasons behind the combination of dark triads with economic offences. Originality/value This study is beneficial to all the beneficiaries of the banking sector and the economy at large in understanding the implications of risks because of patterns formed by emotions and vulnerability towards economic and fugitive economic crimes.

2 citations

References
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Journal ArticleDOI
TL;DR: In this paper, the authors examined a cross-section of about 80 countries for the period 1960-89 and found that various measures of financial development are strongly associated with both current and later rates of economic growth.
Abstract: Joseph Schumpeter argued in 1911 that the services provided by financial intermediaries - mobilizing savings, evaluating projects, managing risk, monitoring managers, and facilitating transactions -stimulate technological innovation and economic development. The authors present evidence that supports this view. Examining a cross-section of about 80 countries for the period 1960-89, they find that various measures of financial development are strongly associated with both current and later rates of economic growth. Each measure has shortcomings but all tell the same story: finance matters. They present three main findings, which are robust to many specification tests: The average level of financial development for 1960-89 is very strongly associated with growth for the period. Financial development precedes growth. For example, financial depth in 1960 (the ratio of broad money to GDP) is positively and significantly related to real per capita GDP growth over the next 30 years even after controlling for a variety of country-specific characteristics and policy indicators. Financial development is positively associated with both investment rate and the efficiency with which economies use capital. Much work remains to be done, but the data are consistent with Schumpeter's view that the services provided by financial intermediaries stimulate long-run growth.

8,204 citations


"Conundrum of Non-performing Assets ..." refers background in this paper

  • ...Various researchers have empirically established the relationship between financial sector developments and economic growth (Bhattacharya & Sivasubramanian, 2003; King & Levine, 1993; Levine, 2004; Rajan & Zingales, 1998; C. Singh, 2005)....

    [...]

ReportDOI
TL;DR: This paper examined whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship; that financial development reduces the costs of external finance to firms, and found that industrial sectors that are relatively more in need of foreign finance develop disproportionately faster in countries with more developed financial markets.
Abstract: Does finance affect economic growth? A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship; that financial development reduces the costs of external finance to firms. Specifically, we ask whether industrial sectors that are relatively more in need of external finance develop disproportionately faster in countries with more developed financial markets. We find this to be true in a large sample of countries over the 1980s. We show this result is unlikely to be driven by omitted variables, outliers, or reverse causality.

6,815 citations

Posted Content
TL;DR: This paper examined whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of external finance to firms, and they found that industrial sectors that are relatively more in need of foreign finance develop disproportionately faster in countries with more developed financial markets.
Abstract: This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of external finance to firms. Specifically, the authors ask whether industrial sectors that are relatively more in need of external finance develop disproportionately faster in countries with more-developed financial markets. They find this to be true in a large sample of countries over the 1980s. The authors show this result is unlikely to be driven by omitted variables, outliers, or reverse causality. Copyright 1998 by American Economic Association.

5,425 citations

Journal ArticleDOI
01 Mar 1998
TL;DR: This article studied the factors associated with the emergence of systemic banking crises in a large sample of developed and developing countries in 1980-94 using a multivariate logit econometric model.
Abstract: The paper studies the factors associated with the emergence of systemic banking crises in a large sample of developed and developing countries in 1980-94 using a multivariate logit econometric model. The results suggest that crises tend to erupt when the macroeconomic environment is weak, particularly when growth is low and inflation is high. Also, high real interest rates are clearly associated with systemic banking sector problems, and there is some evidence that vulnerability to balance of payments crises has played a role. Countries with an explicit deposit insurance scheme were particularly at risk, as were countries with weak law enforcement.

1,678 citations


"Conundrum of Non-performing Assets ..." refers background in this paper

  • ...Mounting NPAs can cause a severe hazard to the growth of the banks, leading to bank failures (Barr et al., 1994; Demirguc-Kunt & Detragiache, 1998)....

    [...]