Today I will discuss the meaning of very important term related to financial institutions like banks. The term is NPA and the full form of NPA is “Non-performing Asset”. Now a days we are daily reading or listening that banks NPAs are increasing on regular basis. Let us understand the meaning of NPA.
As the name suggests, it is that asset which is non performing or in other words which is not giving any return or even the principal amount.
Conditions where a loan of advance will be called NPA:
a) In India, if a bank gives a loan to a particular person or company, and if the company does not give any interest or installment of principal amount overdue for period of more than 90 days or after 91 days, then that loan will be called as non-performing asset (NPA).
b) In case of a bill is purchased and discounted and if it remains due of more than 90 days, then that bill is NPA.
c) For short duration crops, if the interest or installment of principal remains overdue for two crop seasons.
d) For long duration crops, if the interest or installment of principal remains overdue for single crop seasons.
In simple words, if you give a loan to a person on interest and if the person is not giving the interest or returning the amount and, then normally after 90 days your loan is not performing and it will become a non performing asset (NPA) for you.
I hope you have understood the simple explanation of NPA.
If there are more conditions when a loan is called NPA, please share with us.