What is NPA?
NPA is defined as the amount of loan or advance the repayment of which has been overdue for more than 90 days. Banks tend to lend money to the borrower, and the borrower is obligated to pay the pre-specified amount of interest along with the repayment of the principal amount. Non-performing assets are always seen as a risk to the bank and institutions, as they do not generate any income and can lead to losses. They are categorised into three types viz. substandard, Doubtful, or loss assets.
Key takeaways from NPA:
- An asset is classified as NPA when the loans or advances have not been repaid by the borrower for at least 90 days.
- NPAs have a significant impact on both the lending institution and the borrower, as they will affect the financial well-being of the lending institution.
- To tackle the problem of increasing NPA, the government and the Reserve Bank of India have introduced various policies and methods to mitigate and reduce the amount of non-performing assets in the banking sector.
Table of Content
- Full form of NPA
- Types of NPA
- How NPA Works?
- Example of NPA
- Impacts of NPA
- How to Reduce NPA?
- Limitations of NPA
- Conclusion