A strong banking sector is essential for a flourishing economy. A major hindrance faced by most banks today is the problem of non-performing assets (NPA’s).A high level of NPA’s suggests a high degree of credit defaults which, in turn affects the profitability of banks. Decreased profitability implies an unfavorable financial statement which in turn discourages investors from investing in the banks under consideration .Thus, the banks lose out on investments in the long run. This paper discusses the reasons for increased NPA’s and how the emergence of credit rating agencies (CRA’s) and asset reconstruction companies (ARC’s) help in controlling the growth of NPA’s
