A COMPARATIVE STUDY OF ASSET QUALITY IN LEADING PRIVATE SECTOR BANKS OF INDIA

Abstract

Asset quality is a cornerstone of a bank’s overall financial health and a primary indicator of its operational efficiency. It directly reflects the soundness of the bank’s loan portfolio and its ability to generate income without significant risk of loss. High asset quality signifies that the majority of the bank’s assets are performing and generating returns, thereby supporting profitability, liquidity, and capital adequacy. Conversely, deteriorating asset quality, indicated by rising levels of NPAs, can erode profitability, increase provisioning requirements, and undermine investor and depositor confidence. This study focuses on three major private sector banks—Axis Bank, Kotak Mahindra Bank, and Yes Bank—over a five-year period from 2020–21 to 2024–25. The research aims to analyse and compare key asset quality measures, specifically Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA), to evaluate the effectiveness of credit risk management strategies across these institutions. Data analysis reveals a significant improvement in asset quality for all three banks, with GNPA ratios falling well below 2% and NNPA ratios dropping under 1% by 2024–25. Kotak Mahindra Bank emerges as the most consistent performer with exceptionally low NNPA levels, Axis Bank demonstrates steady and sustained improvement, and Yes Bank showcases a remarkable turnaround from severe asset quality stress. The findings reinforce the direct link between effective asset quality management and enhanced financial performance, highlighting the importance of prudent lending practices, robust provisioning policies, and strategic recovery mechanisms in maintaining banking sector resilience.