Introduction To Non Performing Assets. Meaning Of Npa:.

1270 WordsMar 30, 20176 Pages
INTRODUCTION TO NON PERFORMING ASSETS MEANING OF NPA: 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 RBI. An amount due under any credit facility is treated as "past due" when it has not been paid within 30 days from the due date. Due to the improvement in the payment and settlement systems, recovery climate, up gradation of technology in the banking system, etc., it was decided to dispense with 'past due ' concept, with effect from March 31, 2001. Accordingly, as from that date, a Non performing asset (NPA) shell be an advance where:…show more content…
Interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose, and v. Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. ASSET CLASSIFICATION: Assets are classified into following four categories: • Standard Assets: • Sub-standard Assets • Doubtful Assets • Loss Assets • Standard Assets: Standard assets are the ones in which the bank is receiving interest as well as the principal amount of the loan regularly from the customer. Here it is also very important that in this case the arrears of interest and the principal amount of loan do not exceed 90 days at the end of financial year. If asset fails to be in category of standard asset that is amount due more than 90 days then it is NPA. Provisioning Norms: • From the year ending 31.03.2000, the banks should make a general provision of a minimum of 0.40 percent on standard assets on global loan portfolio basis. • The provisions on standard assets should not be reckoned for arriving at net NPAs. • The provisions towards Standard Assets need not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets ' under 'Other Liabilities and Provisions - Others ' in Schedule 5 of the balance sheet. Banks are required to classify non-performing assets further into the following three categories based on the
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