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:
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.
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.
Doubtful Assets: The Assets considered as non-performing for a period of more than 12 months are known as Doubtful Assets.
Loss Assets: All those assets which cannot be recovered by the lending institutions are known as Loss Assets.
