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NPAS AND ITS TYPES

25th August, 2021

Introduction

  • NPA or Non Performing Asset is those kinds of loans or advances that are in default or in arrears.
  • In simpler terms, if the customers do not repay principal amount and interest for a certain period of time, then such loans are considered as Non Performing Assets or NPA.
  • In India, the timeline given for classifying the asset as NPA is 180 days.
  • This is as against 45 to 90 days of international norms.

Types

  • NPAs are of 4 types:

 

  1. Standard Assets: It is a kind of performing asset which creates continuous income and repayments as and when they become due. These assets carry a normal risk and are not NPA in the real sense of the word. Hence, no special provisions are required for standard assets.

 

  1. Sub-Standard Assets: Loans and advances which are non-performing assets for a period of 12 months, fall under the category of Sub-Standard Assets.

 

  1. Doubtful Assets: The Assets considered as non-performing for a period of more than 12 months are known as Doubtful Assets.

 

  1. Loss Assets: All those assets which cannot be recovered by the lending institutions are known as Loss Assets.