The present study explains about the role of digitalization in banking sector along with privileges and its drawbacks. On the night of 8th November 2016, the honorable Prime Minister of India, Shri Narendra Modi made a statement that Rs 500 and Rs 1000 notes in circulation would stop to be legal tender from midnight onwards. Thus, with one announcement the Prime Minister changed about 86% of the currency notes in the Indian economy to simple pieces of paper. The key objectives of the bold step that the NDA government at the centre has taken is to control and eradicate the black money which forms a parallel economy in the country and eradicate the movement or circulation of fake currency from the Indian economy. This movement is called demonetization. Presently gove rnment is trying to step forward for a cashless economy. A campaign was launched for encouraging people to avoid using of liquid cash. A cashless economy is defined as an economy depending on digital transactions in which all the monetary undertakings are done digitally and on credit base. Cashless transactions refers to using of debit cards, credit cards, e- wallets, internet banking for purchases or for making payments instead of using hard cash. Encouragement was given to make use of digital payments, going cashless etc. In the past few years digitalization has emerged as an important tool for economic growth and economic development. People are more depending on technology and digital networking which made their work easier. There are both advantages as well as disadvantages in digitalization. The study explains both advantages and disadvantages of digitalization in banking sector. So it is called as digital economy or digital world. In the present economy, digital networking and communication infrastructures provide a global stand above which people as well as organizations are able to develop strategies, interrelate, correspond, work together and search for information. Credit is mainly defined as an agreement which is based on trust of both the parties for exchanging goods, services, or even money to pay them later. Credit risk of banks is explained better as non- performing assets. The main important problem which the banks are now facing is Non- performing assets. Either public sector banks or private sector banks, the problem of non- performing assets are faced by both the banks. The reasons behind the increase in non- performing assets have been evaluated. The study analyzes the effect of digitalization on non- performing assets. This suggests suitable strategies to control and manage non-performing assets.