Open AccessThe Vicious Circle of Non-performing Assets: An introspection for Indian banks to ensure their profitability amidst COVID – 19 pandemic
Author(s) -
Banajit Changkakati,
Upasana Sharma
Publication year - 2020
Publication title -
international journal for research in engineering application and management
Language(s) - English
Resource type - Journals
ISSN - 2454-9150
DOI - 10.35291/2454-9150.2020.0459
Subject(s) - profitability index , virtuous circle and vicious circle , business , credit risk , credit reference , collateral , sustainability , credit history , balance sheet , order (exchange) , stewardship (theology) , finance , financial system , economics , ecology , biology , politics , political science , law , macroeconomics
The non performing assets (NPAs) or bad loans, as we understand generally, have always been one of the key challenges for Indian banks and financial institutions and they have been adversely affecting the sustainability of these financial service providers. While performing the basic function of extending credit in order to earn interest income, however, it is also important for these institutions to have an efficient and effective credit risk assessment mechanism in place, so that, a proper balance between profitability and sustainability is maintained. Credit scoring models are one of the most important components of credit risk assessment mechanism and banks and financial institutions of many developed countries have developed credit scoring models based on advanced technologies. On the contrary, most of the Indian banks are still dependent on the traditional way of developing credit scoring models, which might be a deterrent against ensuring safe credit policy amidst the COVID – 19 pandemic.