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Theoretical and Applied Economics
No. 4 / 2016 (609), Winter

Determinants of nonperforming assets-bank-specific and macroeconomic factors: A panel data analysis of different group of commercial banks operating in India

Biswajit PATRA
Indian Institute of Technology Bombay, India
Indian Institute of Technology Bombay, India

Abstract. This paper examines the relationship between the Net Nonperforming Assets (NNPAs) and the factors influencing them (bank specific and macroeconomic) for different group of Indian commercial banks (State Bank of India and its associates, nationalised banks, private Banks, foreign banks) in a panel data framework. From the macroeconomic variables, two principal component series have been created; one is from the group of variables having positive correlation with the NNPAs and the other from the group of variables having negative correlation, for different type of banks. The linear and the dynamic panel regressions and further Impulse Response analysis have been carried out to check the linkages between the NNPAs with its determinants. The result shows that the impact of determinants on NNPAs varies for different group of banks as the banking practices and regulations vary among themselves. Indian banks got influenced more in comparison to the foreign banks with the change in macroeconomic conditions.

Keywords: scheduled commercial banks, determinants, nonperforming assets, NPAs, bank specific, macroeconomic parameters, principal components, panel data models, India.

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