Non Performing Assets - NPA


NPA And Basel Norms - Concepts
Class - Bank Of Baroda AO Prelims Subjects
 
 
Concept Explanation
 

Non Performing Assets - NPA

Non Performing Assets (NPA) : No business is without any risk and banks cannot be any exception. But the high quantum of NPAs is surely a cause for worry, especially when Indian banks have an important role to play for growth to be sustained. Any asset becomes non-performing when it ceases to generate income for the bank. In India, the following will be defined as NPAS:

  • Terms loans on which interest and/or installment of principal for a particular quarter remain(s) overdue for a period of more than 90 days from the end of that particular quarter
  • The bills which remain overdue for a period of more than 90 days from the end of a quarter
  • Any amount to be received which remains overdue for a period of more than 90 days
  • The cash credit account that remains out of order for a period of more than 90 days (out of order means over the sanctioned limit)
  • Bank are required to classify non-performing assets further into three main categories based on the period for which the assets have remained non-performing.1. Substandard assets2. Doubtful assets3. Loss assetsThe transition from the standard asset to loss asset takes place as follows:

  • Regular/Standard Asset for any period
  • Special mention account as NPA 90 days after regular period
  • Substandard asset 12 months after mention as NPA
  • Doubtful after another 12 months
  • Loss uncertain
  • Sample Questions
    (More Questions for each concept available in Login)
    Question : 1

    What is known as the Bad advances of a bank ?

    Right Option : A
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    Explanation
    Question : 2

    Bad loans in banking terminology are generally known as _______________________-

    Right Option : B
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    Explanation
     
     
     


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