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    Non Performing Assets

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    kranthi
    Non-performing assets (NPAs) are loans or advances that cease generating income for a bank. An asset is considered non-performing if interest or loan installments are overdue by 90 days or more, or if an overdraft account remains 'out of order' by being continuously over the sanctioned limit for 90 days. NPAs are classified into three categories - sub-standard assets if overdue 12 months or less, doubtful assets if sub-standard for 12 months, and loss assets identified as uncollectible. The availability of security or net worth of the borrower is not factored into determining if an asset is non-performing.

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    Non Performing Assets

    Uploaded by

    kranthi
    7 views2 pages
    Non-performing assets (NPAs) are loans or advances that cease generating income for a bank. An asset is considered non-performing if interest or loan installments are overdue by 90 days or more, or if an overdraft account remains 'out of order' by being continuously over the sanctioned limit for 90 days. NPAs are classified into three categories - sub-standard assets if overdue 12 months or less, doubtful assets if sub-standard for 12 months, and loss assets identified as uncollectible. The availability of security or net worth of the borrower is not factored into determining if an asset is non-performing.

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    Non-performing assets (NPAs) are loans or advances that cease generating income for a bank. An asset is considered non-performing if interest or loan installments are overdue by 90 days or more, or if an overdraft account remains 'out of order' by being continuously over the sanctioned limit for 90 days. NPAs are classified into three categories - sub-standard assets if overdue 12 months or less, doubtful assets if sub-standard for 12 months, and loss assets identified as uncollectible. The availability of security or net worth of the borrower is not factored into determining if an asset is non-performing.

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    7 views2 pages

    Non Performing Assets

    Uploaded by

    kranthi
    Non-performing assets (NPAs) are loans or advances that cease generating income for a bank. An asset is considered non-performing if interest or loan installments are overdue by 90 days or more, or if an overdraft account remains 'out of order' by being continuously over the sanctioned limit for 90 days. NPAs are classified into three categories - sub-standard assets if overdue 12 months or less, doubtful assets if sub-standard for 12 months, and loss assets identified as uncollectible. The availability of security or net worth of the borrower is not factored into determining if an asset is non-performing.

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    NON PERFORMING ASSETS(NPAs)

    An asset becomes non performing when it ceases to generate income for the
    bank.
    NPA is a loan or an advance where;
    i. interest and/ or instalment of principal remain overdue* for a period of more
    than 90 days in respect of a term loan,
    ii. the account remains out of order# in respect of an Overdraft/Cash Credit
    (OD/CC),
    iii. the bill remains overdue* for a period of more than 90 days in the case of
    bills purchased and discounted,
    iv. the instalment of principal or interest thereon remains overdue* for two crop
    seasons for short duration crops,
    v. the instalment of principal or interest thereon remains overdue* for one crop
    season for long duration crops (crop duration > 1 year, sugarcane, banana, etc.)

    CATEGORIES of NPAs:
    Banks are required to classify NPAs into 3 categories based on the period for
    which the asset has remained non performing & the realisability of
    dues:
    Sub Standard Asset(SSA): Remained NPA for a period < = 12 months. Distinct
    possibility that bank will sustain some loss, if deficiencies not corrected.
    Doubtful Asset(DA): If it has remained as SSA for a period of 12 months.
    Weaknesses make collection or liquidation in full, on the basis of currently
    known facts, conditions and values highly questionable and improbable.
    Loss Asset(LA): Loss identified by the bank/ intl/ extl auditors /RBI inspection
    but the amount has not been written off wholly i.e. considered uncollectible and
    of such little value that its continuance as a bankable asset is not warranted
    although there may be some salvage/recovery value.
    Care: Availability of security / NW of borrower/ guarantor is not to be reckoned
    for treating an advance as NPA or otherwise.

    *OVERDUE: Any amount due to the bank under any credit facility is overdue if
    it is not paid on the due date fixed by the bank.

    #OUT OF ORDER(CC/OD): An account should be treated as 'out of order' if


    the outstanding balance remains continuously in excess of the sanctioned
    limit/drawing power.
    In cases where the outstanding balance in the principal operating account is less
    than the sanctioned limit/drawing power, but there are no credits continuously
    for 90 days as on the date of Balance Sheet or credits are not enough to cover

    the interest debited during the same period, these accounts should be treated as
    'out of order'.

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