To Analyse the Non-Performing Assets and Their Influence on Profitability: A Critical Study on Canara Bank

Non-performing assets (NPAs) are loans for which debtors have failed to pay the principal and interest for a specified period. An increase in the number of assets classified as non-performing may result in a decline in the profitability of financial institutions and banks. Therefore, the objective of this research is to evaluate the impact of NPAs on the profitability of Canara Bank, which has a moderate to high level of NPAs. For this, we predominantly obtained data from primary sources, including Canara Bank's annual reports, RBI publications, SEBI filings, NPA trends, future prognoses, and strategic plans from Canara Bank investors. We have opted for a mixed-method, i.e., a quantitative and qualitative approach for fulfilling the objectives, where we collected data from academic databases, business news portals, journals, and finance research reports. In this investigation, we implemented quantitative and qualitative analysis methodologies, including trend and ratio analyses of net profits and NPAs. We also conducted regression and correlation tests to assess the relationship between profitability and NPAs and the effect of NPAs on profitability. The findings suggest that NPAs have a significant adverse effect on profitability and negatively impact the performance of banks. Elevated NPA levels influence the net income and return ratios of banks due to increased provisioning and decreased interest revenue. This research clearly shows that NPAs significantly negatively impact Canara Bank's profitability.