Limitations of NPA
1. Poor Credit Risk Management: Poor credit risk management is one of the main reasons for the rise of non-performing assets. Banks and financial institutions need to effectively assess and monitor the credit risk of their customers in order to avoid non-performing assets.
2. Economic Slowdown: Poor economic conditions of customers can affect their ability to repay their debts, which leads to non-performing assets.
3. Regulatory Changes: Regulatory changes in the market can affect the ability of customers to repay their debts, which leads to non-performing assets.
4. Interest Rates: Charging high-interest rates can lead to non-performing assets as debtors may be unable to meet repayment terms in case of high interest rates.
5. Fraud: Fraudulent activities can also result in non-performing assets. Banks and other financial institutions need to effectively monitor and detect fraud and should perform due diligence before advancing any loan to any lender.