The increasing percentage of non-performing advances and loans in India's banking sector has become an inevitable challenging problem for banks in the current environment, as it can negatively impact their money-making capacity and eventually lead to a decline in their profitability. Profitability can be significantly affected by non-performing advances, but there are some other factors as well that can affect profitability. Therefore, the aim of this study is to empirically investigate the relationship between non-performing assets (NPAs) and profitability by explicitly evaluating the potential determinants of bank profitability. Every pertinent data and fact utilized in this article was sourced from the "Capitaline-2000 Database" and the Reserve Bank of India's official website. It is entirely built on secondary sources. The analysis utilizes a dataset from all 21 Indian private sector commercial banks, spanning the period from April 1, 2014, to March 31, 2024. Static panel regression was used in the study to determine the factors influencing the profitability of Indian private sector commercial banks. The ratio of net NPA to net advances is used as an independent variable to represent non-performing assets (NPAs), while ROA is treated as a dependent variable to show bank profitability. Moreover, apart from non-performing assets (NPAs), several other bank-specific factors have also been used to assess their impact on bank profitability. These include total deposits, the ratio of net interest income to total income, net interest margin, the ratio of operating costs to total interest income, capital adequacy (Tier 1), and two macroeconomic variables: the annual inflation rate and the annual economic growth rate. Since non-performing assets (NPAs) have a detrimental effect on a bank's profitability, the study's conclusions indicate that banks ought to lower these assets in order to improve their profitability.
Upadhyay et al. (Mon,) studied this question.