Chapter 1. Introduction. A Strong Banking Sector Is Very

CHAPTER 1 INTRODUCTION A strong banking sector is very important for developing economy. One of the most important functions of banking is lending money. It is generally encouraged because it has the effect of funds being transferred to productive use, it helps in growing economy. As there are pros and cons of everything, the same is in lending money that carries credit risk, which arises from the failure of borrower to fulfill its contractual obligation. The failure of the banking sector has an adverse impact on other sectors. Non-performing loans are the major problem in banks. NPLs reflect the performances of banks. The issue of non-performing assets has been discussed at length for financial system all over the world. The problem of†¦show more content†¦In most cases, debt is classified as nonperforming when loan payments have not been made for a period of 90 days. NPA is the abbreviation of Non-Performing Assets. As the term NPA reveals its own meaning, Non-Performing: i.e.Non-working, Assets: i.e. capital of financial institution. In financial term a loan A/c is said to be NPA when it is kept inoperative for 90 days without making payment of interest or principal, the borrowers are termed as defaulter, and the amount of that loan is termed as bad loans. Nowadays NPA is becoming a trending topic in banks as many Indian banks are going through this phase. Indian banks are suffering from huge amount of NPAs and BAD loans, the main reason behind this is the basic nature of people that is â€Å"take it and go away†, and our friend Mr.VijyaMallya is one of the biggest examples of it. The main reason behind this is that the bank is not able to recover the loans ,which is one of the major assets of bank now a days causing the heavy loss to them .Also lack in judicial system also favors the loss which says that bank cannot force the borrower for recovery until it was declared a willful defaulter. 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