NON PERFORMING ASSETS

Karanpal singh
10807601
 Non Performing Asset means an asset or account of
borrower, which has been classified by a bank or financial
institution as :
Sub-standard, doubtful or loss asset, in
accordance with the directions or guidelines relating to
asset classification issued by The Reserve Bank of India.

DEFINITION: An asset becomes non-performing when it

ceases to generate income for the bank on actual realization
basis.
A NPA is a loan or an advance where:

Interest or installment of principal remain overdue

for a period of more than 90 days in respect of a term
loan.

The bill remains overdue for a period of more than

90 days in the case of bills purchased and discounted.

The installment or interest remains overdue for two

crop seasons in case of short duration crops and for
one crop season in case of long duration crops .
•Standard Assets – General provision of a minimum of
0.25%

•Substandard Assets – 10% on total outstanding balance.

•Doubtful Assets – 100% to the extent advance not covered

by realizable value of security. In case of secured portion,
provision may be made in the range of 20% to 100%
depending on the period of asset remaining sub-standard

•Loss Assets – 100% of the outstanding

Reason for NPA’S
Internal factor External factor
 
• Chang in industry environment:
 Poor lending decision:
• Natural calamities .
 Non-Compliance to lending norms
• Industrial sickness 

 Improper SWOT analysis • Diversion of funds and willful

defaults
  
 Failure to appreciate good payers:
• Lab our problems of borrowed firm
 
 Excessive overdraft lending  • Business failure
 
• Inefficient management
 Absence of regular industrial visit  
• Obsolete technology
 
Several other Reasons for an account becoming NPA

Project not completed in time.

 Poor recovery of receivables.
Business failures.
Deficiencies on the part of the banks
settlement of payments\ subsidiaries by government
bodies etc
 IMPACT OF NPAS ON OPERATIONS

Drain on Profitability of the banks.

Impact on liquidity.
Involvement of Management.
Credit Loss.
Sectors 2007 2008

Public sector banks 517 533

Old private banks 38 40

New private banks 9 9

Foreign banks 24 26

Financial institutions 143 157

Total 731 766

Various steps have been taken by the government to
recover and reduce NPAs. Some of them are:

1. One time settlement / compromise scheme

2. Lok Adalats
3. Debt Recovery Tribunals
•RBI has decided to set up 7 more debt recovery tribunals
(DRTs) in addition to the existing 22 and 5 appellate
tribunals.
•Replacement of SICA (Sick Industrial Companies Act) was
another major step.
•The RBI has already asked banks to file criminal cases
against borrowers who are willful defaulters.
• These initiatives are expected to aid banks to quickly
recover their dues from the borrowers.
Banks' non-performing assets up 26 percent
Source: Indo Asian News Service

New Delhi, Nov 8 2009 (IANS)

The average non-performing assets (NPAs) of Indian banks during

the second quarter this fiscal went up by 26 percent, says an
industry lobby report.

According to the report by the Associated Chambers of Commerce

and Industry of India , the aggregate NPA of 21 banks increased
by 26 percent to Rs.25,137 crore in second quarter from Rs.19,920
crore in the like period last year.
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