Non-Performing Assets (NPAs) have made the banks financially ill. Comment.

Non - Performing Assets (NPAs) of the banking system in India has assumed lot of importance in view of its effect on the Banking system of India. The legacy of huge NPAs have severely impacted the financial health of banks. Their income from lending activities have eroded and it has made dent to their profitability (non-accounting of interest and making of provisions / increase in administrative expenses of - monitoring, recovery and legal). Banks have no funds to add to their capital and their Net Interest Margin is too thin to survive. However, in line with the international practices and as per the recommendations made by the Committee on the Financial System (Narasimham Committee) the RBI has introduced, in a phased manner, prudential norms for income recognition, asset classification and provisioning for the advances portfolio of the banks so as to move towards greater consistency and transparency in the published accounts. Prudential norms have been strengthened from time to time. With the introduction of Insolvency and Bankruptcy Code, 2016 and restructuring exercises, banks have increased their emphasis on reduction of NPAs.