Vol. 1, Issue 12, Part D (2015)

Abstract
Asset quality is one of the most critical areas in determining the overall financial performance of a bank. Asset quality is related to the left-hand side of the bank balance sheet. Bank management is concerned with the quality of their loans since that provides earnings for the bank. Loan quality and asset quality are two terms with basically the same identical meaning. The quality of assets is an important parameter or component to gauge the financial strength of the bank. The prime motto behind measuring or gauging the assets quality is to ascertain the component of non-Performing Assets (NPA) as a percentage of the total assets. This indicates the models of advances which the bank has made to generate interest income. Thus, assets quality shows or indicates the type of the debtors the bank is having.