About NPA(Non-performing Asset)

What is NPA?

You must first be aware of this. NPA is that. Non-Performing Asset is the full form of the phrase. We refer to it as a non-performing asset in Hindi. When someone has borrowed money from a bank. He is unable to make EMI payments. His loan account is then referred to as NPA. We can also put it this way in plain language. implies the bank's loan to that person has failed. And with whom there is no chance of reuniting. It is known as NPA. NPA has historically occupied a significant conversational space in the banking industry. Additionally, the banks are having a lot of issues as a result of NPA. This is mentioned as the bank extends credit to every business. that if you borrow 10 crores from us in a loan. In order to uphold our guarantee, you must continue paying 10% interest on that sum. if your company isn't operating correctly and you don't pay your interest on time. Up until that point, there are no issues, but later, if there is a conflict within the organization. or the business starts to struggle. If interest is not paid to the bank within 90 days, in the interim. As a result, the bank designates that loan amount as an NPA.

if the account is an NPA debt. Consequently, realize that money does not stimulate the economy. when the average person is unable to pay back interest on amounts up to one lakh or five lakh. Thus, lenders begin using a variety of strategies. However, individuals who flee the nation with millions of rupees flee. until they receive the bank's warning. They would have departed the nation.

How many types of NPA?

NPA is frequently considered to be one kind. You should know that an NPA account is not the same, though. This is not at all what NPA signifies. that the bank's funds have lost value. Alternatively, the bank may not be collecting the loan. The truth is that a bank must classify a loan account into one of three categories—Substandard Assets, Doubtful Assets, or Loss Assets—after designating it as a non-performing asset (NPA).

1. Substandard Assets - Any loan account that is in NPA status for less than a year. As a result, it is known as Substandard Assets.

2. Doubtful Assets - A loan account that has been classified as Substandard Assets for a year. Thus, it is known as a questionable asset.

3. Loss Assets - A loan is regarded as a loss asset if there is no expectation of its recovery.

When does the account become NPA?

whenever someone obtains a bank loan. He must therefore return the money to the bank in installments. If, in the meanwhile, the person fails to pay the bank three successive installments of money, Thus, his account is marked as NPA. The bank also delivers a notification to the homeowner's home. if even after receiving the notification, the person is unable to return the money to the bank. So instead of that loan, the bank accepts the mortgage document. The asset provided as payment for it is forfeited. Considering that no financial institution offers a loan without a mortgage.

What are the disadvantages of NPA?

After failing to pay back the loan, the bank declares bankruptcy. But RBI has also established some provisioning guidelines for this. The provision amount must be kept apart from the company by the bank. Research claims that Indian banks currently have an 8.50 lakh crore NPA. 10% makes up this sum. which is excessive For your knowledge, let us say that the NPA causes the banks' profits to decline. The government receives less money as a result. and the capacity for investment by the government shrinks. In this case, the bank charges a lower interest rate on investments and a higher interest rate on loan amounts in order to get rid of this NPA.

For your knowledge, let us mention that this led to a global recession in the year 2007. Banks were heavily involved in the current recession, and if action was not taken to swiftly give them more authority, the country's economy would suffer. several significant issues resulted as a result. the first year that banks started to refrain from making loans. Second, numerous large projects were halted since there was no long-term solution to the NPA issue. Banks were unable to provide further funding for these projects. The industrialists' debt accumulation and inability to obtain a new loan was the third effect, though. During that time, some merchants had left the nation.

What is the status of NPA in banks?

Currently, the country's 38 listed commercial banks have an NPA of $8.41 trillion. Government banks hold 90% of these. which account for 70% of the whole banking system's value. According to central bank officials and economic analysts, if action is not taken quickly, this amount might exceed 20 lakh crores. The NPA was Rs 3,51 lakh crore in the third quarter of 2015, and it has more than doubled by June 2017. 29 trillion rupees The highest NPA among government banks is at SBI. in excess of Rs 2 lakh crore.PNB is at number two with 55,000 crores. Bank of India is at number three with Rs.46,000 crore and IDBI at number four with Rs.43,000 crore. Apart from this, ICICI Bank is number one among non-government banks with 43,000 crore NPA. At number two is Axis Bank with 20,000 crores, HDFC Bank is at number three with 7,000 crores.

Efforts made by the government to stop the increasing NPA 

The following are some recent government measures to stop the growing NPAs:

• Appointment of Nodal Officers for recovery in banks at their Headquarters / Regional Offices / each Debt Recovery Tribunal (DRT).

• Emphasis on recovery of loss assets by banks and Asset restructuring companies Appointment of resolution agents.

• Instructing the State Level Bankers' Committees to be proactive in resolving the issues with the State Governments.

• Sanctioning of new loans on the basis of information sharing among banks.

• Analysis of NPAs on the basis of sector/activity etc.

By Moni Sinhmar