The Indian banking sector had undergone significant changes since 1991 when it was transformed from a highly regulated, predominantly state-owned industry to a more competitive industry with a sizeable presence of private sector banks. However, by 2017, despite reforms implemented by the government, the sector was facing many challenges. The most worrisome problem was an increasing number of non-performing assets (NPAs), particularly among the state-owned banks. Although the Indian economy was one of the fastest growing among larger countries with a stable government, its future growth was compromised by the immediate challenges in the banking sector. What had caused NPAs in the Indian banking sector and how could the problem be addressed?

The Indian banking sector had undergone significant changes since 1991 when it was transformed from a highly regulated, predominantly state-owned industry to a more competitive industry with a sizeable presence of private sector banks. However, by 2017, despite reforms implemented by the government, the sector was facing many challenges. The most worrisome problem was an increasing number of non-performing assets (NPAs), particularly among the state-owned banks. Although the Indian economy was one of the fastest growing among larger countries with a stable government, its future growth was compromised by the immediate challenges in the banking sector. What had caused NPAs in the Indian banking sector and how could the problem be addressed?