“A STUDY ON TREND ANALYSIS OF NON-PERFORMING ASSETS”

Abstract

Non-Performing Assets (NPAs) are a key indicator of asset quality and financial health in banking institutions, and understanding the relationship between Gross NPA, Net NPA, and profitability is essential for assessing a bank's credit risk management. This paper examines the trend and statistical relationship between Gross NPA Ratio, Net NPA Ratio, and Net Profit of KDCC Bank Ltd., Machilipatnam over a five-year period (2020-21 to 2024-25), using secondary data drawn from the bank's annual reports. Correlation and regression analysis were applied to test the relationship between these variables. The results show a very strong positive correlation between Gross NPA Ratio and Net NPA Ratio (r = 0.993224), while both showed only a weak positive correlation with Net Profit (r = 0.029634 and r = 0.034740 respectively). Regression analysis further confirmed that Net NPA Ratio has a statistically significant positive effect on Gross NPA Ratio (R² = 0.842846, Significance F = 0.027804, p < 0.05). These findings indicate that while Gross and Net NPA move very closely together, the bank's Net Profit has remained largely independent of short-term fluctuations in its NPA ratios, suggesting adequate provisioning and stable underlying credit management at KDCC Bank Ltd. The paper concludes with suggestions for sustaining this trend.