Non Performing Assets (Npa) - Pregnant Types Provision Causes

Non-Performing Assets (NPA) - Meaning

Non-Performing Assets are popularly known every bit NPA. blogspot.com//search?q=commercial-banks-definitions-primary">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 produce non generate periodical income are called every bit Non-Performing Assets (NPA).

If the customers produce non repay principal total in addition to involvement for a surely menses of fourth dimension in addition to thence such loans buy the farm 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 xc days of international norms.

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India in addition to Non-Performing Assets

In India, NPA were really high inwards the showtime of 90's. Over a menses of fourth dimension in that place is considerable refuse inwards the NPA's of all blogspot.com//search?q=commercial-banks-definitions-primary">banks. In the illustration of populace sector banks, gross non-performing assets were 9.4% inwards 2002-03 in addition to it declined to 7.8% inwards 2003-04. The internet NPA during the same menses declined from 4.5% to 3%.

Types of NPA

NPA convey been divided or classified into next 4 types:-

1. Standard Assets : Influenza A virus subtype H5N1 touchstone property is a performing asset. Standard assets generate continuous income in addition to repayments every bit in addition to when they autumn due. Such assets behaviour a normal conduct a opportunity in addition to are non NPA inwards the existent sense. So, no exceptional provisions are required for Standard Assets.
2. Sub-Standard Assets : All those assets (loans in addition to advances) which are considered every bit non-performing for a menses of 12 months are called every bit Sub-Standard assets.
3. Doubtful Assets : All those assets which are considered every bit non-performing for menses of to a greater extent than than 12 months are called every bit Doubtful Assets.
4. Loss Assets : All those assets which cannot hold upward recovered are called every bit Loss Assets.

These assets tin hold upward 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 give away of factors or causes like:-

1. Speculation : Investing inwards high conduct a opportunity 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 in addition to diversion of business.
5. Internal reasons : Many internal reasons similar inefficient blogspot.com//search?q=commercial-banks-definitions-primary">management, inappropriate technology, labour problems, marketing failure, etc. resulting inwards pitiable functioning of the companies.
6. External reasons : External reasons similar a recession inwards the economy, infrastructural problems, toll rise, delay inwards unloosen of sanctioned limits past times banks, delays inwards settlements of payments past times government, natural calamities, etc.