Loan for Non Performing Asset (NPA)
Loan for Non Performing Asset (NPA)
A non performing Asset loan (NPAL) is a bank loan that is subject to late repayment or is unlikely to be repaid in full by the borrower. Non-performing Asset loans represent a major challenge for the banking sector, as they reduce profitability.
They often claim to prevent banks from lending more to businesses and consumers, which in turn slows economic growth, although this theory is disputed.
In the European Union, the management of NPALs resulting from the 2008 global financial crisis has become a politically sensitive topic, culminating in a 2017 European Council decision tasking the European Commission to launch an action plan to deal with NPALs. handed over.
NPAL. The action plan supports the promotion of a secondary market for NPALs and the creation of asset management companies. In December 2020, this action plan was revised in light of the COVID-19 pandemic crisis
Non Performing Asset (NPA)
NPA extends to Non-Performing Asset (N. P. A.). The Reserve Bank of India defines a non-performing asset in India as any advance or loan that is overdue for more than 90 days. “An asset becomes non-performing when it ceases to generate income for the bank,” said the RBI in a circular form 2007. In order to be more attuned to international practices, RBI has introduced the overdue norm of 90 days for recognition of NPAs with effect from the year ended March 31, 2004. There are different types of non-performing, depending on how long the asset has been NPA Property too.
How do Non-Performing Assets (NPAs) work?
Non-Performing Assets (NPAs) are loans or advances issued by banks or financial institutions that no longer bring in money for the lender because the borrower has failed to make payments on the principal and interest on the loan for at least 90 days. A loan that has remained outstanding and not paid for a predetermined period of time is known as a Non-Performing Asset (NPA). When the NPA ratio in a bank’s loan portfolio rises, its income and profitability fall, its ability to lend falls, and the likelihood of loan defaults and write-offs increases. To address this issue, the government and the Reserve Bank of India have introduced various policies and methods to manage and reduce the amount of non-performing assets (NPAs) in the banking sector.
What is asset and non performing assets for a bank?
Property means anything that is owned. For banks, a loan is an asset because the interest we pay on these loans is one of the most important sources of income for the bank. When the customer, retail or corporate, is not able to pay the interest, the asset becomes ‘non-performing’ for the bank as it is not earning anything for the bank. Hence, RBI has defined NPA as an asset that has ceased to generate income for them.
Types of Non-Performing Assets (NPAs)
The different types of non-performing assets depend on how long they remain in the NPA category.
a) sub-standard property — An asset is classified as a sub-standard asset if it remains as NPA for a period less than or equal to 12 months.
b) Doubtful Assets — An asset is classified as a doubtful asset if it remains as NPA for more than 12 months.
c) loss asset — An asset is considered a loss asset when it is “uncollectible” or has so little value that its continuance as a bankable asset is not suggested. However, some realizable value may be left in it because the asset has not been written off in whole or in part.
NPA provision
Keeping the technical definition aside, provisioning refers to the amount that banks set aside from their profits or income in a particular quarter for non-performing assets, such as assets that may turn into losses in the future. It is a method by which banks provide for bad assets and maintain a healthy book of accounts. Provision is made according to the category to which the asset belongs. The categories are mentioned in the above section. Not only the type of asset but also the provisioning depends on the type of bank. As such, Tier-I banks and Tier-II banks have different provisioning norms.
GNPA and NNPA
Banks are required to make their NPA numbers public from time to time and inform the RBI. There are mainly two metrics that help us in understanding the NPA status of any bank. The NPA numbers of a bank will be mentioned in the standalone financial statements of the bank.
GNPA: GNPA stands for gross non-performing assets. GNPA is an absolute amount. It tells you the total value of gross non-performing assets for the bank in a particular quarter or financial year, as the case may be.
NNPA: NNPA stands for net non-performing assets, NNPA deducts the provisions made by the bank from gross NPA, so net NPA gives you the exact value of non-performing assets after specific provisions are made by the bank,
NPA Ratio
NPA can also be expressed as a percentage of total advances. This gives us an idea of the percentage of total advances that are uncollectible. The calculation is quite simple: GNPA ratio is the ratio of total GNPA to total advances. The NNPA ratio uses the ratio of net NPAs to total advances.
Example of NPA
Let us take a look at the quarterly results of State Bank of India for two quarters to determine the examples of non-performing assets through the results. The NPA ratio is mentioned in the standalone quarterly results. Banks are required to publish their financial results on the exchanges every quarter of the financial year. High NPA may not be favorable for a bank. This is because they are assets that are not performing. High NPA means that banks have too many loans which have become non-functional or not giving any interest income to the bank. Banks can either keep the NPAs in their books in the hope that they will be able to recover or make provisions for the same. Otherwise, banks write off the loan entirely as bad debt. However, apart from NPAs, there are many other factors to assess the bank.
Where to get loan if the customer is a Non Performing Asset?
Customers can avail loan through private finance through blpcii.com if the customer has a non-performing asset. In case of non performing Asset of the customer the customer has to contact on the number 9999305389.
blpcii.com (BIGGEST LOAN PROVIDER COMPANY IN INDIA) is the only company in India to provide loan to the customer if the customer Account is Non Performing Asset (NPA).