Non Performing Asset (NPA)

Non Performing Asset is an advance where interest or installment of principle remains overdue for a period of more than 90 days.

Categories of NPA's:

1) Substandard Assets

An asset which has remained NPA for a period up to 12 months.

Provisioning- 10%.

2) Doubtful Asset

An asset which has remained sub-standard for a period of 12 months becomes a Doubtful Asset.

Provisioning

after 1 year- 20%
after 2 years- 30%
after 3 years- 100%

3) Loss Asset

An asset becomes loss asset where loss has been identified by the bank or internal or external auditors or RBI inspection.

Note: General Provisioning for Standard Asset is .25%.

SARFESI Act- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act 2002.

Empowers Banks/Financial Institutions to recover their non- performing assets without the intervention of the courts.

Disclaimer- Subject to change.