Non Performing Assets-A Study on Size Differences of Commercial Banks

High level of NPAs leads to loss of income on one hand and on the other hand heavy provisioning requirements on NPAs leads to further erosion of already depleted profits. For any economy which is striving for achieving reasonable growth rate with the given resources, banking system acts as a blessing. Now banks perform the major role of channelizing the surplus funds of surplus savings unit and providing it to the deficit saving units. Today NPAs have become major drawback for Indian Banking Industry. NPAs are highly unacceptable due to the issues faced in terms of lower profitability and capital erosion. Study sample conprises of 35 Indian Commercial Banks and study period covers past 12 financial years spanning between 2007-2018. Data collected through secondary source is subjected to Trend Analysis, one way ANOVA and Gabriel Post Hoc test. Two financial ratios are used namely Gross NPAs to Gross Advances and Net NPAs to Net Advances.The present research work shows that medium sized banks are incurring NPAs higher than small banks and large banks. Small banks are more efficient than medium and large banks and thus banks should not always favor the merger and expansion strategies. The study reveals that there is no significant difference exists in Gross NPA to Gross Advances and Net NPA to Net Advances of small, medium and large banks.The study does not supports "too big to fail" attitude and foreshadows that big size of banks may not always provide economies of scale. Thus the society should evaluate the financial position from every aspect before voting in favor of medium and large banks.