Non-Performing Asset (NPA)
A loan or advance in default or close to being uncollectible.
Detailed Description
Non-Performing Asset (NPA)
What is the typical period for a loan to be classified as a Non-Performing Asset (NPA)?
A loan is typically classified as a Non-Performing Asset (NPA) if the principal or interest payment is overdue for 90 days or more.
What are the main categories of NPAs?
NPAs can be classified into three main categories: substandard, doubtful, and loss assets, based on the duration of default and likelihood of recovery.
What are some common causes of Non-Performing Assets?
Common causes of NPAs include economic downturns, poor credit assessment, inadequate risk management, and external factors like natural disasters.
How do NPAs impact financial institutions?
High levels of NPAs can erode a bank's profitability, affect capital adequacy, diminish investor confidence, and hinder the bank's ability to lend.
What are some strategies for managing and resolving NPAs?
Strategies for managing NPAs include restructuring loans, pursuing legal recovery options, engaging asset reconstruction companies, and implementing robust credit risk management practices.