Non-performing assets (NPA) – Know what is non-performing assets (NPA)?

Non-performing assets (NPA), know what is non-performing assets (NPA)?

Non-performing assets (NPA) – are loans which are not repaid on time. This means that The lender does not repay the interest or principal amount of the loan for more than 90 days. Is being done.

Non-performing assets (NPA) Example-

For example, suppose You borrow money from a bank and are expected to return it periodically with interest. But if you do not pay for more than 90 days, your loan will be classified as Non-Performing Assets (NPA).

Why is NPA a matter of concern for financial institutions?

NPAs are a major concern for financial institutions like banks as they lead to loss of income for the lender. When a loan is not being repaid, the bank is not earning any interest or other returns on that loan. This may impact the financial health of the bank, as it may need to set aside more funds as provisions for bed loans, which may impact their profitability and capital adequacy.

What are the options available to banks to deal with NPA?

Banks try to avoid NPA by doing due diligence before lending money to borrowers. This includes assessing the borrower's creditworthiness, financial health and the purpose of the loan. Additionally, banks may try to recover NPA by taking legal action against the borrower, restructuring the loan, or selling the property pledged as collateral.

Overall, NPA is a challenge for both borrowers and lenders. Borrowers may face legal consequences or a damaged credit score, while lenders may suffer financial losses and decreased profitability.

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