What Are The Classifications of NPA?

 


Non-Performing Assets, or NPAs, are loans or advances that are in default or arrears. This means that the borrower has failed to make interest or principal payments for a certain period, typically 90 days. NPAs are a critical concern for banks and financial institutions because they indicate that the borrower is unable to meet their financial obligations, which can affect the institution's profitability and financial health.

Classification of NPAs:

  1. Substandard Assets:

    • Assets that have remained non-performing for a period of less than or equal to 12 months.

  2. Doubtful Assets:

    • Assets that have remained in the substandard category for 12 months or more.

  3. Loss Assets:

    • Assets where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. Such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted.

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