Introduction to NPA (non-performing assets)
Loans or advances in default or arrears are called NPA or non-performing assets. Arrears is when the payments are delayed or missed. A loan defaults when the loan agreement is broken and the individual who has taken the loan cannot meet the financial obligations.
Understanding NPA
Non-performing assets are listed on the balance sheet of a bank or some other financial institution. After an extended period of non-payment, the lender forces the borrower to liquidate any assets that were vowed as part of the debt agreement. If there are no such assets, the lender might write off the asset as a bad debt and sell it at a discount to any collection agency.
In most cases, debt is classified as non-performing when loan payments have not been made for 90 days. While 90 days is usually the standard, the amount of passed time may be shorter or longer based on the terms and conditions of each loan. A loan can be classified as a non-performing asset at any point during the term of the loan or at its maturity.
Types Of Non-Performing Assets (NPA)
Although the most common non-performing assets are term loans, there are other forms of non-performing assets.
Overdraft and cash credit accounts left out-of-order for more than a period of 90 days
Agricultural advances whose principal instalment payments continue to stay overdue for two crop/harvest seasons for small duration crops or overdue one crop season for extended duration crops
Expected payment on any account is overdue for more than 90 days
