IMPACT OF NPAs ON PROFITABILITY OF THE SELECT PUBLIC AND PRIVATE SECTOR BANKS IN INDIA: AN EMPIRICAL ANALYSIS

The issue of Non-Performing Assets (NPAs) continues to be one of the most critical challenges faced by the Indian banking sector, with direct implications on profitability and financial stability. This study examines the impact of NPAs on the profitability position of select scheduled commercial banks in India, comprising five public sector and five private sector banks, over a ten-year period from 2015 to 2024. The research is based on secondary data which has been collected from the websites of RBI and annual reports of respective banks. Using descriptive statistics and regression analysis, the study evaluates the relationship between asset quality ratios (Gross NPA and Net NPA) and profitability indicators (ROA, ROE, ROI, NPM, and NIM). The descriptive results highlight that NPAs, particularly during 2016-2020, severely deteriorated profitability, as reflected in negative ROA, ROE, and NPM values. However, a significant improvement was observed before 2020, with declining NPA levels and stronger profitability ratios. Further, the regression models confirm that Gross NPAs has consistently negative and statistically significant effect on ROA, ROE, and ROI, whereas Net NPAs significantly influence ROI and NIM. The models demonstrate high explanatory power, with R² values ranging between 68 percent and 86 percent underscoring the critical role of asset quality in shaping profitability outcomes of the select public and private sector scheduled commerce banks during the study period. Keywords: NPAs, Asset Quality, Profitability, Public and Private Sector Banks.