The Indian banking sector has been facing serious problems of raising Non-Performing Assets (NPAs)1. The thickening of NPAs has a direct impact on the profitability of financial institutions. There has hardly been any systematic evaluation of the best way of confronting the NPAs problem. There seems to be no concord in the proper policies to stick to in resolving this problem. NPAs reflects the performance of financial institutions. A high level of NPAs denotes a high probability of a large number of credit defaults that affect the profitability and net-worth of financial institutions and also scrape away the value of the asset2. NPAs posing threat on quality of asset also has a deleterious impact on the liquidity and profitability. The menace of NPAs is not only impacting the financial institutions but also the whole economy. Actually, a high level of NPAs in Indian banks is nothing but a display of the state of health of the industry and trade3. It is needful to reduce NPAs to improve the health of the financial system. An attempt is made by the researcher to understand NPA, the status and trend of NPAs in DFIs, The factors contributing to NPAs, reasons for high impact of NPAs on DFIs in India and recovery of NPAS through various channels.

1 Economic Survey 2016-17. “Chapter: 4 The Festering Twin Balance Sheet Problem” Government of India, Ministry of Finance, Department of Economic Affairs, Economic Division (January 2017). p.82. Retrieved from http://finmin.nic.in/indiabudget2017-2018/es2016-17/echapter.pdf.Accessed on 7 May, 2017.

2 Mendes, A., Lodhi, G.S., (2006), “A Study of Non-Performing Assets of Public Banking Sectors with Special Reference to Pune District”, International Research Journal of Management Sociology & Humanities, Vol. 7 (8), pp.224-230. Retrieved from: http://www.irjmsh.com/Artical_details.aspx?&id=5023#

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3 Singh, V.R., (March 2016), “A Study of Non-Performing Assets of Commercial Banks and It’s Recovery in India”, Annual Research Journal of SCMS, Pune, Vol.-4, pp. 110-125. Retrieved from: https://www.scmspune.ac.in/chapter/2016/Chapter%209.pdf

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