A Cross-Sectional Analysis of Asset Quality Effect on Profitability of Indian Banking Industry
This study investigates whether asset quality effect the bank’s profitability in India. The study applies a panel regression method to the quarterly data set including 1026 observation belongs to 93 Banks in India during the period from 2005 to 2016. It is found that there is a significant, negative relationship between non-performing loans, impairment charges and profitability which is measured by return on equity and return on asset. The higher non-performing loans the lower asset quality, lead s to the lower return on equity and return on asset, and the lower non-performing loans, the higher asset quality, leads to the higher return on equity and return on asset.
Keywords: Asset Quality, Nonperforming Assets, Return on Asset, Return on Equity