Non Performing Assets (NPA)

A ‘non-performing asset’ (NPA) was defined as a credit facility in respect of which the interest and/ or installment of principal has remained ‘past due’ for a specified period of time.

With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the ‘90 days’ overdue’ norm for identification of NPAs, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where;

   Interest and/ or installment of principal remain overdue for a period of     more than 90 days in respect of a term loan,
   The account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),
   The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
   Interest and/or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
   Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.

Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained non-performing and the realisability of the dues:

   Sub-standard Assets
   Doubtful Assets
   Loss Assets

References