| Summary: | The financial crisis of 2008-09 emphasized that banks succumb to rising pressure
of Non-Performing Assets (NPAs), which affects their long-term sustainability and
growth. Though India remained relatively unaffected by the crisis, the present state
of NPAs in the country is rather alarming even after adhering to the Basel norms
for decades. In the light of these concerns, this study investigates whether NPAs
are an Achilles’ heel of adopting higher Capital Adequacy Requirements (CAR) of
Basel norms, introduced to bring financial stability. Panel regression has been
employed on a sample of 46 banks for the period 2005-2018, to include both Basel
II and III regimes to draw better conclusions about the relationship. To delve deeper,
a disaggregative analysis based on the ownership of banks and accounting for the
effects of Global Financial Crisis (GFC) is carried out. The study reveals a positive
relationship between the two, post crisis. However, the possible explanation for this
relationship is different from the explanation usually stated for developed countries
that observe a similar relation.
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