What are the causes of non performing assets?

The causes behind Non Performing Assets (NPA’s) are varied. Some of the causes are high degree of fraud, crony capitalism, various macro economic factors like downturn in commodity price cycles, lower exports due to recession. You can read about the Non Performing Assets (NPA) – What is the meaning of NPA? [UPSC Economics Notes] in the given link.

Major NPA problems arose during the global financial crisis of 2008 due to which repayment of loans was not possible. The other causes of non performing assets which can be attributed as internal causes are faulty and incomplete documentation, absence of regular follow ups, credit appraisal system is poor, lending process was defective, deficiencies of the managers.

Further readings:

  1. RBI – Reserve Bank of India [UPSC Indian Economy Notes]
  2. Bad Banks – Idea Proposed by Indian Banking Association (IBA) Due to COVID-19

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