Financial Inclusion and NPAs: Implications for Bank Profitability in India

Financial inclusion, NPAs, and bank profitability are well-studied, but not in developing nations. In 2005 06 to 2022-23 panel data, Financial Inclusion (FI) and Non-Performing Assets (NPA) affect Indian public and private bank profitability. Quantile regression examines bank profitability’s impact. Non-performing asset management enhances bank profitability, highlighting the long-term benefits of inclusion schemes with effective risk management. The study shows that bank profitability and type affect these three factors. Banks’ large client bases boost profitability, while administrative costs lower it. FI benefits private banks but damages state banks. The essay urges authorities to include NPA in financial inclusion to enhance bank revenues. Financial institutions must tailor their strategies to bank type and profitability. Technology-based lending is needed for NPA management by public sector banks. To mitigate financial inclusion losses, policymakers must subsidise public sector banks and encourage private sector banks to become inclusive.