What is the full form of NPA?

The Full Form of NPA is a non-performing asset

Non-Performing Assets is the acronym for this. It refers to a loan or advance for which the principal or interest payment has not been made for at least 90 days; in other words, it refers to a bank’s assets (loans or advances made to clients) that are non-performing (don’t generate a profit).

For instance, a bank granted a corporation a loan of Rs. 10 lakh with a monthly interest-only payment of Rs. 5000. To comply with regulatory standards, the bank must classify this loan as a non-performing asset if the company is unable to make payments for three consecutive months (90 days). Due to reduced cash flow caused by unpaid interest or principal, NPAs affect lenders for the lender. It disrupts the budget and decreases earnings and reduces the capital to provide subsequent loans. 

The Banks have classified NPAs into three categories or types which are as follows:

  • Substandard assets: It refers to those assets which remain NPA or are overdue for a period less than 12 months but more than 90 days.
  • Doubtful assets: It refers to those assets which are overdue for a period exceeding 12 months.
  • Loss assets: It refers to those assets which are doubtful and considered non-recoverable by the bank, internal or external auditors,s and central bank inspectors.

Common Reasons for NPA

  • Default: The non-payment (default) by the borrowers.
  • Economic conditions: The unfavorable economic condition due to natural calamities, political reasons or any other reason.
  • Bad credit history: The loan is provided to borrowers who have had a bad credit history.
  • Negligence: Sometimes borrowers bribe bank officials to get loans with an intention of default.
  • Diversion of funds: The borrowed funds are used for other purposes instead of those mentioned in the loan documents. Such borrowers usually fail to repay the loan. 

FAQ

What are NPA and examples?

At any time before or after the loan’s maturity, it may be designated as a nonperforming asset. Assume, for illustration, that a business with a $10 million loan making interest-only payments of $50,000 a month misses three payments in a row. 

What is NPA in law?

NPA Act (Non-Performing Assets Act, and interpreting Sections… TransCore Vs. UNION OF INDIA), held: “The NPA Act proceeds on the ground that security interest vests in the bank. 

What is an NPA bank account?

2.1.1 When an asset, especially one that is leased, stops bringing in money for the bank, it is considered to be non-performing.A credit facility that has interest and/or principal payments that have been past due for a predetermined amount of time is referred to as a “non-performing asset” (NPA). 

What is the NPA according to the RBI?

A “nonperforming asset” (NPA) is defined as a credit for which interest and/or a principal installment have been “past due” for a predetermined amount of time. The specified period was cut short gradually as follows: The year concluded on March 31. the specific time frame of 1993.


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