The movement of trade and commerce in any country rests on the pillars of money injected by the banks for the growth of the economy. The banking field is assumed to deal with two most important types of risks, namely the credit risk and default risk. A bank's efficiency lies not in keeping away but in managing these dual risks. The core parameter in judging a bank's performance is its level of Non Performing Assets (NPAs). The major concern for any bank (public/private/foreign) is the efficient management of its loan accounts. If proper credit evaluation is done at the time of advancing loans then the ratio of NPAs to loan accounts can be reduced.

NPA refers to the loan account of a financial institution which has ceased to generate the desired income for the business. In the context of banks, an asset is defined as a NPA when interest and/or principal amount becomes past due for a specific period. The time span for determining NPA with effect from March 31, 2004 is 90 days. Generally, NPAs are shown under two heads: Gross and Net NPAs. The former represents loan amount inclusive of both interest and principal while the latter represent loan amount exclusive of interest. These troublesome accounts if not corrected in time could lead to a zero asset base for a bank. Perhaps, NPAs are the measure of a bank's quality of assets. Thus improper management of loan assets leads to poor quality of assets on the bank's balance sheet.

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