Non Performing Assets (Npa) - Pregnant Types Provision Causes

Non-Performing Assets (NPA) - Meaning

Non-Performing Assets are popularly known every bit NPA. 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 create non generate periodical income are called every bit Non-Performing Assets (NPA).

If the customers create non repay principal sum as well as involvement for a sure as shooting menstruation of fourth dimension therefore such loans teach 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 ninety days of international norms.

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India as well as Non-Performing Assets

In India, NPA were rattling high inward the showtime of 90's. Over a menstruation of fourth dimension in that place is considerable turn down inward the NPA's of all banks. In the instance of populace sector banks, gross non-performing assets were 9.4% inward 2002-03 as well as it declined to 7.8% inward 2003-04. The cyberspace NPA during the same menstruation declined from 4.5% to 3%.

Types of NPA

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

1. Standard Assets : Influenza A virus subtype H5N1 criterion 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 acquit a normal endangerment as well as are non NPA inward the existent sense. So, no particular 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 menstruation of 12 months are called every bit Sub-Standard assets.
3. Doubtful Assets : All those assets which are considered every bit non-performing for menstruation of to a greater extent than than 12 months are called every bit Doubtful Assets.
4. Loss Assets : All those assets which cannot last recovered are called every bit Loss Assets.

These assets tin last identified past times the Central Bank or past times the Auditors.

Provision on types of assets

Provision is allocating coin every twelvemonth to come across possible futurity loss.

Causes of NPA

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

1. Speculation : Investing inward high endangerment 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 management, inappropriate technology, labour problems, marketing failure, etc. resulting inward pitiful functioning of the companies.
6. External reasons : External reasons similar a recession inward the economy, infrastructural problems, toll rise, delay inward free of sanctioned limits past times banks, delays inward settlements of payments past times government, natural calamities, etc.