Asset Quality Deterioration and Credit Risk Management in Indian Banks : A Post-Reform Study

Asset quality deterioration has been recognized as an important issue in the banking sector in India in recent times, especially in the backdrop of rising non-performing assets and structural reforms to build financial sector resilience. Though a wide range of literature has been developed on the issue of rising NPAs and banking sector performance in India, it has been observed that there is a research gap in linking the issue of asset quality deterioration and the effectiveness of credit risk management in the backdrop of recent reforms. This research aims to examine the level of asset quality deterioration and assess the effectiveness of credit risk management in the backdrop of recent reforms in the banking sector in India. The research is based on secondary data collected between 2010 and 2025, with a sample size of 20 banks from the list of major commercial banks in India, including public and private sector banks. The research will be conducted using panel data regression analysis and trend and ratio analysis. The results show that lack of proper credit appraisal, sectoral concentration of loans, and macroeconomic factors were significant factors in the deterioration of asset quality, particularly in public sector banks; however, with the introduction of post-reform measures in terms of enhanced supervisory vigilance and improved recovery mechanisms, there has been a significant decline in NPAs and an improvement in risk assessment techniques. The paper also points out significant policy implications in terms of developing effective risk assessment techniques, technological upgradation in credit monitoring systems, and supervisory vigilance.