Abstract: Non-performing assets (NPAs) have been a constant challenge for Indian commercial banks. They hurt profitability, credit growth, and financial stability. Even with regulatory actions and reforms, the buildup of stressed assets continues to threaten the banking system, especially during economic downturns. Banks often use loan restructuring methods like moratoriums, delayed repayment schedules, and interest capitalization to handle stressed loans. However, these practices can lead to negative amortization, where the total loan amounts increase over time. While these measures give borrowers temporary relief, their long-term effects on asset quality and bank performance raise serious concerns.
This study aims to explore the link between negative amortization, NPA buildup, and bank profitability in Indian commercial banks. It uses a quantitative and empirical research design based on secondary data from the Reserve Bank of India, annual reports from selected banks, and financial databases. Bank-level panel data covering the period from 2016 to 2025 is examined using financial ratio analysis, descriptive statistics, correlation analysis, and panel regression techniques. The findings show a positive connection between negative amortization indicators and NPAs. They also highlight a significant negative effect of NPAs on profitability measures such as return on assets, return on equity, and net interest margin. This study provides important insights for improving credit risk management and strengthening the stability of the banking sector.
Keywords: Negative Amortization; Non-Performing Assets; Bank Profitability; Indian Commercial Banks; Panel Data Analysis.
Title: Impact of Negative Amortization on NPA Accumulation and Bank Profitability: Evidence from Indian Commercial Banks
Author: Satyajit Yashwantsinh Jhala
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Vol. 14, Issue 1, April 2026 - September 2026
Page No: 67-77
Research Publish Journals
Website: www.researchpublish.com
Published Date: 10-April-2026
