Non Performing Assets (Npa) - Pregnant Types Provision Causes

Non-Performing Assets (NPA) - Meaning

Non-Performing Assets are popularly known every bit NPA. blogspot.com//search?q=commercial-banks-definitions-primary">Commercial Banks assets are of diverse types.

All those assets which generate periodical income are called every bit Performing Assets (PA).

While all those assets which produce non generate periodical income are called every bit Non-Performing Assets (NPA).

If the customers produce non repay principal sum as well as involvement for a sure enough catamenia of fourth dimension as well as thence such loans dice non-performing assets (NPA). Thus non-performing assets are basically non-performing loans.

In India, the fourth dimension frame given for classifying the property every bit NPA is 180 days every bit compared to 45 days to xc days of international norms.

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India as well as Non-Performing Assets

In India, NPA were real high inwards the starting fourth dimension of 90's. Over a catamenia of fourth dimension in that place is considerable reject inwards the NPA's of all blogspot.com//search?q=commercial-banks-definitions-primary">banks. In the illustration of populace sector banks, gross non-performing assets were 9.4% inwards 2002-03 as well as it declined to 7.8% inwards 2003-04. The cyberspace NPA during the same catamenia declined from 4.5% to 3%.

Types of NPA

NPA bring been divided or classified into next iv types:-

1. Standard Assets : Influenza A virus subtype H5N1 measure property is a performing asset. Standard assets generate continuous income as well as repayments every bit as well as when they autumn due. Such assets behaviour a normal adventure as well as are non NPA inwards the existent sense. So, no exceptional provisions are required for Standard Assets.
2. Sub-Standard Assets : All those assets (loans as well as advances) which are considered every bit non-performing for a catamenia of 12 months are called every bit Sub-Standard assets.
3. Doubtful Assets : All those assets which are considered every bit non-performing for catamenia of to a greater extent than than 12 months are called every bit Doubtful Assets.
4. Loss Assets : All those assets which cannot live on recovered are called every bit Loss Assets.

These assets tin post away live on identified past times the Central Bank or past times the Auditors.

Provision on types of assets

Provision is allocating coin every yr to run into possible futurity loss.

Causes of NPA

NPA arises due to a publish of factors or causes like:-

1. Speculation : Investing inwards high adventure assets to earn high income.
2. Default : Willful default past times the borrowers.
3. Fraudulent practices : Fraudulent Practices similar advancing loans to ineligible persons, advances without safety or references, etc.
4. Diversion of funds : Most of the funds are diverted for unnecessary expansion as well as diversion of business.
5. Internal reasons : Many internal reasons similar inefficient blogspot.com//search?q=commercial-banks-definitions-primary">management, inappropriate technology, labour problems, marketing failure, etc. resulting inwards piteous functioning of the companies.
6. External reasons : External reasons similar a recession inwards the economy, infrastructural problems, cost rise, delay inwards free of sanctioned limits past times banks, delays inwards settlements of payments past times government, natural calamities, etc.