A Study on Loan Processing, Recovery and Asset Quality of Commercial Banks - an Empirical Analysis

Abstract

This study titled “A Study on Loan Processing, Recovery and Asset Quality of Commercial Banks – An Empirical Analysis” examines the effectiveness of loan processing procedures, recovery mechanisms, and asset quality management practices followed by commercial banks. The banking sector plays a vital role in economic development by providing credit facilities to individuals and businesses. Efficient loan processing and timely recovery of advances are essential for maintaining profitability, liquidity, and overall financial stability of banks. The study focuses on analyzing the relationship between loan sanction procedures, recovery performance, and the quality of assets maintained by commercial banks. It evaluates the factors influencing non-performing assets (NPAs), recovery efficiency, credit appraisal systems, and risk management practices. Both primary and secondary data sources are used for the analysis, including annual reports, banking records, journals, and customer responses. Statistical and financial tools such as ratio analysis, trend analysis, and comparative analysis are applied to interpret the data. The findings of the study reveal that effective credit appraisal, proper documentation, regular monitoring of loans, and strong recovery strategies significantly improve asset quality and reduce NPAs. The study also highlights that technological advancements and regulatory guidelines issued by the Reserve Bank of India have strengthened banking operations and recovery practices. However, challenges such as delayed repayments, economic fluctuations, and weak borrower assessment continue to affect the asset quality of commercial banks. The study concludes that commercial banks must adopt robust credit risk management systems, strengthen recovery procedures, and implement efficient monitoring mechanisms to maintain healthy asset quality and ensure sustainable banking performance. Keywords: Loan Processing, Loan Recovery, Asset Quality, Commercial Banks, Credit Risk Management, Non-Performing Assets (NPA), Loan Appraisal, Banking Sector, Credit Monitoring, Financial Performance