Vol. 7, Issue 1, Part M (2025)

The Indian banking sector, particularly the State Bank of India (SBI), faces significant challenges owing to non-performing assets (NPAs) and their impact on credit risk and financial performance. This study aims to examine the trend of net NPAs and investigate the correlation between net NPAs and credit risk indicators, such as the Capital Adequacy Ratio (CAR) and Risk-Weighted Assets Ratio (RWA), as well as overall financial performance ratios, including Return on Assets (ROA) and vision coverage ratio (PCR) of SBI from 2020-21 to 2024-25. This study employs an empirical approach using secondary data from SBI's annual reports and various financial institutions. Analytical tools, including trend analysis and correlation tests, were used to analyze the data. The findings reveal a consistent decline in the Net NPA ratio, from 1.5% to 0.47%, indicating improved asset quality and effective credit risk management. The Provision Coverage Ratio and Capital Adequacy Ratio also show improvements, reflecting robust provisioning buffers and a strong capital position. The ROA increased significantly from 0.48% to 1.1%, suggesting enhanced profitability. Statistical analysis revealed no significant correlation between the Net NPA ratio and the risk-weighted assets, capital adequacy, or provision coverage ratios. However, there is a strong negative correlation between the Net NPA ratio and ROA. The study concludes that SBI successfully managed credit risk and improved its overall financial performance during the analyzed period, positioning itself favorably in the competitive banking sector. Continued vigilance and adaptive strategies are crucial to sustain this positive trajectory in an evolving economic landscape.