What is the full form of NPA?
The full form of NPA is Non Performing Assets. NPA is a mortgage or advance in respect of which the interest or principal payment has been overdue for ninety days. This 90 Days duration is the standard time frame. Such NPA is also called bad loans. The Non-Performing Asset generally refers to the mortgage or credit of a bank borrower for which one or more payments have been due for a long time. Today, it is considered a ‘non-performing asset’ legally because the “asset” has prevented the Bank from operating or generating any income.
NPA is Classified into specific groups. NPA is characterized according to the status of the repayment. Based on the record of an asset or default time frame or risk factor, we can divide the NPAs as below.
Standard assets are the ones with the lowest risk. They carry a low risk, as per bank regulations. These assets are also in the Bank’s position in generating some profits. These are all the sort of assets where the borrower seeks to make unpredictable and rarely with the-time payments.
Sub-Standard Assets are Assets that’s been in the NPA group for 365 days or more. In the case of Sub-Standard Assets, the lender must maintain 15 percent of the reserves.
Doubtful assets are those that have ‘non-performed’ for more than 365 days. Consequently, they can be said to bring a ‘more than-normal’ risk, and the lender needs to pay special attention.
Those assets merely turn into bank losses, as the word implies. Those assets have been non-performing for more than three years and are considered “lost assets.” means that it is not possible to recover such assets.
Reasons for NPA
- The nonpayment or default borrowers.
- The lousy business conditions are due to natural calamities, political justifications or some other excuse.
- The loan is made available to lenders whose credit background is poor.
- And borrowers often bribe bank employees with the default intention of receiving loans.