Date of Publication :20th April 2021

Abstract: Indian banking sector is currently running through a phase where deteriorating asset quality has become a major cause of concern for all the banks. This paper attempts to evaluate how differently NPAs affect the financial statements of public sector banks (PSBs) and private sector banks (PVBs). To support the study, Pearson’s correlation coefficient has been used to find out the correlation between NPAs of banks with their net profits. The research resulted into an interesting finding that all selected six PSBs were found to have a negative correlation between NPAs and net profits whereas and only two out of six selected PVBs resulted into negative correlation of NPAs and net profits. The rest four PVBs resulted into a positive correlation with their net profits which technically proves that their other incomes are high enough to absorb the losses by their NPAs and still be able to add it to their net profits. It also reflects that they have an effective recovery mechanism. This proves the fact that PVBs are far ahead in managing their stressed assets than PSBs. The study also evidently proves that a continuous increasing trend in net NPAs is seen ore prominent in public sector banks in comparison to private sector banks.

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