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 AssetsAn 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.
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