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A Comparative Study of Non-performing Assets Using Non-parametric Test: Indian Scheduled Commercial Banks

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  • Bhabani Mishra
  • S. S. Rath

Abstract

Galloping levels of impaired assets slowly destroy the economy by throwing it into a major financial crisis. The current article studies recent trends and compositions of stressed assets among 45 selected Indian commercial banks. The non-parametric test (Kruskal–Wallis) is applied to know whether there exists any difference in the movement of gross non-performing assets ratios and net non-performing assets ratios (NNPAs) among bank groups and individual banks. The group-wise comparative study shows that a significant difference exists in the movement of NNPA ratio only between foreign banks and public sector banks and between private banks and public sector banks. Significant differences also exist among the individual banks in foreign and private bank groups. The Games–Howell post-hoc test finds that some pairs of banks have significant differences. The current financial downswing attributed to pandemic has increased the chances of fraudulency and sporadic default events and enhanced the problem of bad loans. Amalgamations of State Bank of India with its associates in 2017 and Bank of Baroda with Dena Bank and Vijaya Bank in 2019 have shown falls in stressed assets that possibly foreshow the future furtherance in asset quality of other four anchor banks that are merged with six banks, with effect from April 2020. JEL: G21, G34

Suggested Citation

  • Bhabani Mishra & S. S. Rath, 2023. "A Comparative Study of Non-performing Assets Using Non-parametric Test: Indian Scheduled Commercial Banks," Arthaniti: Journal of Economic Theory and Practice, , vol. 22(2), pages 228-250, December.
  • Handle: RePEc:sae:artjou:v:22:y:2023:i:2:p:228-250
    DOI: 10.1177/09767479211027874
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    References listed on IDEAS

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    1. Rajeswari Sengupta & Harsh Vardhan, 2017. "Non-performing assets in Indian Banks: This time it is different," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2017-019, Indira Gandhi Institute of Development Research, Mumbai, India.
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    More about this item

    Keywords

    Non-performing assets; bank groups; amalgamations; Kruskal–Wallis test; Games–Howell test;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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