Non Performing Assets
NON PERFORMING ASSETS(NPA)
WHAT IS A NPA (NON PERFORMING ASSET)
Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by RBI.
Non-performing asset (NPA) shell be a loan or an advance where; i. interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan, ii. the account remains 'out of order' for a period of more than 90 days, inrespect of an overdraft/ cash Credit(OD/CC), iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, iv. interest and/ or installment 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 purpose, and v. any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
'Out of order'
An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/ drawing power. In case where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for six months as on the date of balance sheet or credits are not enough to cover the interest debited during the same period, these account should be treated as 'out of order'.
Overdue
Any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the bank.
CAUSES FOR NON PERFORMING ASSETS
There are several reasons for an account becoming NPA.
* Internal factors
* External factors
Internal factors:
1. Funds borrowed for a particular purpose but not use for the said purpose.
2. Project not completed in time.
3. Poor recovery of receivables.
4. Excess
WHAT IS A NPA (NON PERFORMING ASSET)
Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by RBI.
Non-performing asset (NPA) shell be a loan or an advance where; i. interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan, ii. the account remains 'out of order' for a period of more than 90 days, inrespect of an overdraft/ cash Credit(OD/CC), iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, iv. interest and/ or installment 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 purpose, and v. any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
'Out of order'
An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/ drawing power. In case where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for six months as on the date of balance sheet or credits are not enough to cover the interest debited during the same period, these account should be treated as 'out of order'.
Overdue
Any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the bank.
CAUSES FOR NON PERFORMING ASSETS
There are several reasons for an account becoming NPA.
* Internal factors
* External factors
Internal factors:
1. Funds borrowed for a particular purpose but not use for the said purpose.
2. Project not completed in time.
3. Poor recovery of receivables.
4. Excess