N_P_A

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Today's topic is 👉N_P_A

Non Performing Asset

Definition: A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. Description: Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.

✅ Bank NPA

A non-performing asset (NPA) is a classification used by financial institutions for loans and advances on which the principal is past due and on which no interest payments have been made for a period of time.

✅ Causes of N_P_A

Loan or advance provided by the banks are considered as banks' assets as banks will earn interest on them. The businesses sometimes default on the loan repayments and this causes banking NPA (non-performing assets).

✅Methods on how to reduce NPA in banking sector:

1) Debt Recovery Tribunals. The Act, which was passed by the Indian Parliament in 1993, empowers financial institutions to quickly collect debts of ten lakhs or more. ...

2) Lok Adalats. ...

3) Compromise Settlement. ...

4) Credit Information Bureau. ...

5) Sarfaesi Act, 2002.

✅ Effect of NPA

The impact of rising NPAs can be as follows: Rising NPAs undermine the bank's image, making the public lose trust in banks. The depositors may withdraw their deposits causing liquidity issues for banks. The lack of liquidity prevents banks from lending for other productive activities in the economy.

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