"Non-Performing assets are one of the biggest challenges facing the banking system"? Critically Evaluate this statement with regard to banking environment ?(Please Answer in 200 to 250 Words )
"Non-Performing assets are one of the biggest challenges facing the banking system"? Critically evaluate this statement concerning the banking environment.
Non -performing assets act like a virus affecting the banking sector all over the world. They are in the form of advances and loans. Non-performing assets fail to generate income for the banking sector. The income is expected to make provisions such assets to the business sector. In the current era, most businesses focus on getting the global market, ensuring they get maximum returns. These businesses get the start-up and growth capital from the banks in the form of loans. The interests in these loans are the source of income for the banks. However, it is not always easy for the banks to get bank its loan plus the interest, and thus these loans become the non-performing assets. Managing such loans and advances has become a difficult task for the banking industry. The defaulters of these loans increase each new day, and efforts to reduce this trend are not bearing any fruits. Usually, banks are set to offer loans to the society and, in return, collect interests and repayment of principals. The two are the cash inflows for the banks, which become the profit. It has come to a stage where the banking sector is stranded to stop issuing the loans to avoid piling of non-performing assets. Therefore, it is a big challenge in the banking sector in almost every part of the world since it is uncontrollable.