Published Online:January 2026
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP210126
DOI:10.71329/IUPJARAP/2026.25.1.435-445
Author Name:Anu Lohan and Parveen Kumar
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:435-445
The paper explores the impact of credit risk, specifically net non-performing assets (NNPA), and capital adequacy ratio (CAR) on the financial performance indicators—return on assets (ROA) and return on equity (ROE)—of small finance banks (SFBs) in India. The empirical analysis was conducted using panel data regression on four SFBs from 2018 to 2023. The findings reveal that there was an insignificant yet positive effect of CAR on ROA and ROE of SFBs in India. Moreover, the study established a negative and significant impact of NNPA on ROA and ROE of SFBs. The study provides valuable insights for investors, banks, and management regarding the financial performance of SFBs and recommends implementing effective credit risk management systems.
The Reserve Bank of India (RBI) recently introduced small finance banks (SFBs), granting licenses to 10 SFBs in the country in September 2015. SFBs play a crucial role in the Indian financial landscape by promoting financial inclusion and serving the underserved segments of the population