NON-PERFORMING ASSETS AND CAPITAL ADEQUACY IN BANKS: INSIGHTS FROM THE LITERATURE

The increasing issue of NPAs has become a serious concern worldwide and presents a major challenge for the Indian banking sector as well. Different indicators often used to judge the financial soundness of banks are ROA and ROE, which are negatively affected by NPAs while depicting the profitability and overall efficiency of banks. The capital buffer is usually explained as the difference between the banks\' actual capital adequacy ratio and the minimum regulatory requirement fixed by the central bank. Banks use these buffers during bad times to maintain stability. Due to their importance, studies on NPAs, profitability, and capital buffer have been given substantial importance. we determined that the majority of the studies rely on secondary data. Furthermore, recent academic research, between 2015 and 2024, are reviewed with a view to identifying emerging themes, insights, and research gaps regarding non-performing assets and their relationship with profitability and capital buffers. The review has identified that the usual determinants selected in earlier studies include capital adequacy ratio, non-performing loans, inflation, and gross domestic product as independent variables, while ROA and ROE have been widely considered as a measure of bank performance. The findings highlight the redominance of studies relying on secondary data and emphasize the need for further exploration of the unexplored aspects of NPAs in the Indian context.