This paper investigates the determinants of non-performing advances (NPA) in the Indian banking system with the help of panel data modeling. Panel dataset of 31 Indian banks with yearly data that spans the period from 2000 to 2012 totalling 372 firm years has been analyzed. The study examined the impact of macroeconomic variables and bank specific characteristics upon the non-performing advances of the banks. Macro-economic variables had greater impact on Gross NPA ratio compare to NNPA ratio. This is because NNPA depends upon the NPA provisions made by the bank. Among macro-economic variables GDP, construction expenditure, growth rate in per capita income, foreign exchange reserves, stock market index and volatility have statistically significant inverse relationship with NPA ratios. This infers that economic growth coupled with positive stock market and foreign exchange market performance will indicate the reduction in nonperforming loans and the banks can go forward with credit growth expansion plans. © P. Krishna Prasanna, M. Thenmozhi, Nimit Rana, 2014.