An Analysis of Non-Performing Assets in Priority and Non-Priority Sectors of Scheduled Commercial Banks in Nagaland (FY 2020-21 to FY 2025-26)

Abstract

Non-Performing Assets (NPAs) remain one of the most persistent threats to the stability and profitability of the Indian banking system, and their sectoral distribution offers valuable insight into the nature of credit risk confronting banks operating in smaller, less industrialised states such as Nagaland. This study undertakes a bank-wise and year-wise examination of NPAs across the agricultural priority sector, the Micro, Small and Medium Enterprises (MSME) sector, other priority sector categories, and the non-priority sector for twelve public sector and ten private sector scheduled commercial banks operating in Nagaland over the six-year period FY 2020-21 to FY 2025-26, using secondary data compiled by the State Level Bankers' Committee (SLBC), Nagaland. Employing ratio analysis, trend analysis, and comparative cross-sectional techniques, the study computes the average NPA amount per account in order to standardise loan severity across banks of differing size. The findings indicate that public sector banks have achieved a marked decline in agricultural NPAs, while private sector banks display fewer but more volatile and higher-value defaults, particularly in the MSME and non-priority segments. The study concludes that credit risk in Nagaland is increasingly concentrated in a small number of high-value accounts rather than being systemic in nature, carrying important implications for targeted, sector-specific policy interventions by regulators and bank management.