FULL FORM OF NPA

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WHAT IS NPA

         NPA stand for Non Performing Asset. It is the amount of loan or advance given to customers for which the principle or interest payment is not  recovered for at least 90 days. This loan or advance will comes in the category of  Non Performing Asset or bad loans.
       This can be understand with the following example --
     Suppose a bank has given a loan of Rs 5,000000/ to a company with interest rate of 10% for the period of 5 years. The monthly installment is Rs106235/ . If that company fails to repay the monthly installment for three months then the loan amount with interest will become Non Performing Asset for the bank. NPA reduces cash flow for the bank. It disrupts budget and decreases earning and reduce the liquidity to provide loans for other customers or business entity.
   The NPA are classified into three category ---

SUBSTANDARD ASSET: 

    In this category the asset which remains for more than 90 days but less than 12 months.

DOUBTFUL ASSET:

   In this category the asset which remains NPA or overdue for more than 12 months.

LOSS ASSET:

   It refers to those assets which are doubtful and considered as non-recoverable by banks,internal or external auditor and by central banks inspectors.

      

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