Non-Performing Assets and Exchange Rate Volatility

Abstract

Non-Performing Assets are considered as the major challenge toai Indian banks like 
SBI which comes under public sector bank. Violations in asset quality have long-term 
connotations for the financial position of banks as it underpins profitability, solvency, and 
liquidity. In this study, the impact of NPAs on three important performance parameters such as 
Loan Loss Provisions (LLP), Capital Adequacy Ratio (CAR) and Loan-to-Deposit Ratio 
(LTDR) which are used as indicators to assess financial soundness and robustness of a bank 
has been analysed. PERSISTENCE OF RISING NPAsTo counterbalance rise in LLP banks 
begin to experience declining operational profits and a weakening of internal capital 
generation.  
The research sheds light on the specific ways in which NPAs undermine various 
dimensions of banking performance using secondary data from annual reports and RBI 
bulletins published by SBI over two decades, supplemented with previous academic studies. 
Despite the improvement in asset quality over time on account of reforms, restructuring and 
technological monitoring being undertaken by SBI NPA levels remain elevated & act as a drag 
on efficiency and growth . However, the need for more comprehensive credit appraisal process 
and stringent recovery thereby is expected to continue as well in order make NPA management 
effective strengthening their profitability as investors look upon stable banking system.