?:abstract
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This article examines the increasing corporate debt vulnerability and its impact on the asset quality of the Indian public sector banks (PSBs) in the post-global financial crisis (post-GFC) of 2008 The study shows that the stress in both corporate and bank balance sheets has increased in the post-GFC As a result, there has been a steep increase the proportion of firms with negative profitability The article finds that the declining profitability has severely affected the debt serviceability of the firms Consequently, the debt at risk has risen significantly, which in turn has contributed to increase in non-performing assets (NPAs) of the banking sector, particularly, the PSBs Using the panel regression technique, the study finds that the corporate debt vulnerability is an important determinant of the growth of NPAs along with other factors such as debt concentration, corporate sales growth, lending to sensitive sectors, bank profitability, bank size and the efficiency of banks
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