Non-Performing Assets In India: Priority Vs Non- Priority Sector Lending


The Indian banking sector is going through some reinforcement. One of the biggest challenges for the banking sector in India is mounting Non-Performing Assets (NPAs). The main reason for NPAs could be attributed to the types and patterns of lending. As per Narasimham Committee II recommendations, priority sector lending has a proportionately higher share in NPA portfolio of banks. It has been one of the factors in erosion in the quality of bank assets. The objective of this paper is to make a comparison between NPAs in priority and non-priority sector with respect to private
and public sector banks in India. An attempt has been made to distinguish NPAs in priority sector in the private sector and public sector banks. Secondary data on NPAs of priority and non-priority sector of private
and public sector banks has been obtained for the period 2012 to 2017.

Keywords: Non- Performing Assets, Priority Sector,
Private sector banks, Public sector banks


Facilitating mobility of funds and capital formation, banks play a significant role in the economic growth of a country (Saini and Sindhu, 2014). Towering NPAs is a matter of concern for the banking industry of an
economy. Advances that are outstanding for at least three months are known as Non-Performing Loans (Rinaldi and Sanchis-Arellano, 2006). As provided by RBI, an asset is classified as Non-Performing when no income is generated from it. In other words, an NPA is a loan on which principal and/or interest remain “overdue” for a period of 90 days or more (Master
Circular- Income Recognition, Asset Classification, Provisioning, and other Related Matters).

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