What is NPA

What is NPA – Non performing assets. who manages it

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    An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. A ‘non-performing asset’ (NPA) was defined as a credit facility in respect of which the interest and/ or instalment of principal has remained ‘past due’ for a specified period of time. The specified period was reduced in a phased manner as under:

    Year ending March 31

    Specified period

    1993

    four quarters

    1994

    three quarters

    1995 onwards

    two quarters

    2.1.2 An amount due under any credit facility is treated as “past due” when it has not been paid within 30 days from the due date. Due to the improvements in the payment and settlement systems, recovery climate, upgradation of technology in the banking system, etc., it was decided to dispense with ‘past due’ concept, with effect from March 31, 2001. Accordingly, as from that date, a Non-performing Asset (NPA) shall be an advance where

      1. interest and/or instalment of principal remain overdue for a period of more than 180 days in respect of a Term Loan,
      2. the account remains ‘out of order’ for a period of more than 180 days, in respect of an Overdraft/Cash Credit (OD/CC),
      3. the bill remains overdue for a period of more than 180 days in the case of bills purchased and discounted,
      4. interest and/or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
      5. any amount to be received remains overdue for a period of more than 180 days in respect of other accounts.

    2.1.3 With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the ‘90 days’ overdue’ norm for identification of NPAs, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where;

      1. interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan,
      2. the account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),
      3. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
      4. interest and/or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
      5. any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.

     

    Source  – https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx%3FId%3D449

    Answered on 2019-09-27.
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