An empirical analysis of the causal relationship between NPA and its determinants in Yes Bank

The economy has always hinged on the banking sector for rational financial support in adverse situations. Dissemination of loans and advances is one of the most prominent functions of banks. The problem arises when banks face Non-Performing Assets (NPAs) which lead to upheavals in the economy. This is the situation in case of the turmoil in Yes Bank since September 2018. The study focuses on the relationship between NPA and its determinants in case of Yes Bank. The study was performed using data from 2010-11 to 2018-19 through econometric tools like KPSS unit root, OLS regression, Granger causality test, Breusch-Godfrey test, Breusch-Pagan-Godfrey test, CUSUM test, and others. It was found that profitability and growth of loans and advances had a significant impact on NPAs of Yes Bank in the long run while in the short-run causality, there was a unidirectional relationship of NPA-led bank rate, and loans and advances-led NPA. Further, the study involved only a single bank; hence, the literature was confirmed or rejected related with similar variables. The model formed was appropriate for both sample and population, which was free from serial correlation, heteroscedasticity, instability, and abnormality. Policymakers are suggested to frame a high-level research committee to analyse the lack of managerial effectiveness and NPA levels, as well as to tackle these problems using model framed by the researchers. The glory of Yes Bank will be back again with positive news of investment, expansion and performance stability
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