ZNON PERFORMING ASSETS

NPA

BUSINESSMEN TAKE LOANS FROM BANKS AND USE IN BUSINESS OPERATION

Banks earn interest on these loans after business operate

Companies would have to repay loan with interest in timely installment weather profit or loss

If companies not repay it on time by intentionally or due to loss, after 3 months it will be considered as NPA for banks.

Why these loans considered as the assets? Because these are

generally big amounts and which could be turn into assets.

This is like, banks invest their assets in particular business.

when it not generating profit or return, that’s mean their assets is not performing.

We could define NPA,s into three

category

1 . sub-standard assets

Assets which have not been paid until 2 years from the due date

2.Doubtful assets

if there is some possibilities to recover NPA even after two years.These are mostly loan to weak businesses .

3.Loss assets

Assets which which have been considered as loss and unable to recover . Assets is totally lost .

RBI has settled stander for NPA for international system . According to it, banks has to secure some part of its funds for the provision of NPA.

SEBI has notified rules to turn these NPA into equities. Now bank can play a huge role into administration of companies which don’t pay their loans. Provisions in Such rules Where loans from consortiums and financial institutions could be tern into equities under guidelines of RBI.

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