ISSN (Online) : 2456 - 0774

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ISSN (Online) 2456 - 0774

Impact of Demonetization on NPA Position of Indian Banks


Demonetisation affects almost all service sectors of the nation, of which banking sector is the most affected one. It brings many opportunities as well as threats to the banking sector. This demonetisation has brought huge funds into banks i.e. approximately 17 lakh crores within 30th December 2016 but on other hand it also brings few difficulties like long queue of customers at banks, overtime work for banking staff, difficulty in handling numerous accounts, idle funds due to delay in mobilisation of deposits, etc. Now one of the major threats of banking sector is rising of NPAs. The paper basically focuses on the how this demonetisation would affect this most crucial issue of banking industry. Can this demonetisation control such NPAs? Hence, both the positive and negative aspects of demonetisation related to NPAs are discussed in this paper. In addition to that the paper also elucidates the method of squaring off amount of net amount deposited by borrowers against the loan taken by them and how this demonetisation prevents diversion of funds which is also a cause for increasing wilful defaulters are also discussed in this paper. This paper is an attempt to highlight the short term as well as the long term effects of demonetisation on NPA levels of Indian Banks. Keywords : Demonetisation, Non-Performing Assets (NPA), Wilful defaulter, Diversion of Funds

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