Impact of Corporate Governance Practices on Non-Performing Assets (NPA) Management in Indian Public and Private Sector Banks

Non-performing Assets (NPAs) are the main reason of draining the capital and weakening the financial strength of Banks. In order to increase the efficiency and profitability of banks the NPA requirement to be controlled and reduced. This study emphases on the growing concern of mounting NPA in Indian banking sector and impact of 1 corporate governance practices on Non-Performing Assets (NPA) Management. Using the statistical tool correlation, this study highlights the correlation between weighted corporate governance score and net NPA ratio of public and private sector banks in India. Further regression analysis is performed to determine the impact of corporate governance practices in Indian public and private sector banks on their NPA management. Findings of the study advocates that, the correlation between average weighted CG score and net NPA ratio in public sector banks is significant and the impact (based on regression value) of average weighted CG score on net NPA ratio is also significant in public sector banks. In case of private sector banks both correlation and impact was found to be insignificant. But the irony is that both correlation and impact (based on regression value) was found to be positive in all cases which indicates that CG measures are improving over the last Six (06) years but not resulting in lower NPA neither in public nor in case of private sector banks in India