This asset is used in the banking sector. This sector has many assets and their own rules & regulations. Today we are here to discuss Npa which full form is Non Performing Assets.
What is NPA?
Non Performing Asset is when a person in a specified time didn’t pay their installment or EMI before due duration this money is called to be Npa. When a person fails to return the money taken from a bank, then such kind of a loan becomes nonperforming in the RBI guidelines. There is no guarantee whether the bank gets it’s amount back from the person or not.
How money became NPA :
If you take a loan from a bank and didn’t pay your EMI.
When the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Non-performing assets are responsible for dipping a bank. and it also affects the loan rate and economy.
How bank affected by the bank?
The increased NPA make bank in pressure on recycling of funds and reduce the ability of bank for giving loan and the results of this government have less interest.T he main source of banks income is interesting. they provide you. Loan and charge some amount.So the increasing of it does not only affect the performance of the banks but also affect the economy as a whole.
Categories of Non Performing Assets :
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An asset when a person fails to pay interest on time or regularly, it’s called standard assets.
When assets remained NPA less than 12 months or equal this type of assets called substandard assets.
Doubtful assets :
When your NPA is more than 12 months that type of it is called doubtful assets
When loss is identified by your bank Or By bank inspector or and other sources. The amount is not written that how much NPA is. That’s called loss assets.
Effects of NPA-
Carrying these assets also refers to nonperforming loan, on balance Sheet trading three distinct burdens on lenders. The non-payment of interest reduce cash flow for the lender which disrupt Budgets and decreases earning. Loan Loss Provisions-Which is set aside to cover potential losses, reduce the capital available to provide a subsequent loan. Once actual losses from defaulted loans are determined, they are written off against earning.
Current condition in India :
Collection of it in India is at the peak there are many defaulters came to know and also much industry that is responsible for India’s NPA crisis.
- Kingfisher is the most defaulter company ever.
Non Performing Assets is the most influencing factors that affect the profit rate of the Banking Sector.RBI Suggested various measures to recover the loss from it like increasing the rate of provisioning Coverage Ratio, conduct more recovery camps, Resale of NPA to Asset Reconstruction companies etc.
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