What is the full form of NPA
NPA: Non Performing Assets
NPA stands for Non Performing Assets. It refers to a loan or advance for which the principal or interest payment is not paid for at least 90 days, i.e. the assets of a bank (loans or advances given to customers) that are not performing (don?t bring any return) are called Non Performing Asset or bad loans.
For example, a bank has sanctioned a loan of Rs. 10 lakh to a company with interest-only payment of 5000 per month. If the company fails to make the payment for three consecutive months (90 days), the bank is required to categorize this loan as a non-performing asset to meet the regulatory requirements. The NPA places burden on the lenders as nonpayment of interest or principal reduces cash flow for the lender. It disrupts 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:
Common Reasons for NPA