Non Performing Assets (Npa) - Important Types Provision Causes

Non-Performing Assets (NPA) - Meaning

Non-Performing Assets are popularly known equally NPA. Commercial Banks assets are of diverse types.

All those assets which generate periodical income are called equally Performing Assets (PA).

While all those assets which create non generate periodical income are called equally Non-Performing Assets (NPA).

If the customers create non repay principal total as well as involvement for a sure enough catamenia of fourth dimension thus such loans expire non-performing assets (NPA). Thus non-performing assets are basically non-performing loans.

In India, the fourth dimension frame given for classifying the property equally NPA is 180 days equally 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 really high inwards the starting fourth dimension of 90's. Over a catamenia of fourth dimension in that place is considerable reject inwards the NPA's of all banks. In the illustration of world sector banks, gross non-performing assets were 9.4% inwards 2002-03 as well as it declined to 7.8% inwards 2003-04. The cyberspace NPA during the same catamenia 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 touchstone property is a performing asset. Standard assets generate continuous income as well as repayments equally as well as when they autumn due. Such assets comport a normal direct chances as well as are non NPA inwards the existent sense. So, no exceptional provisions are required for Standard Assets.
2. Sub-Standard Assets : All those assets (loans as well as advances) which are considered equally non-performing for a catamenia of 12 months are called equally Sub-Standard assets.
3. Doubtful Assets : All those assets which are considered equally non-performing for catamenia of to a greater extent than than 12 months are called equally Doubtful Assets.
4. Loss Assets : All those assets which cannot live on recovered are called equally Loss Assets.

These assets tin terminal live on identified past times the Central Bank or past times the Auditors.

Provision on types of assets

Provision is allocating coin every twelvemonth to encounter possible time to come loss.

Causes of NPA

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

1. Speculation : Investing inwards high direct chances 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 inwards miserable surgical physical care for of the companies.
6. External reasons : External reasons similar a recession inwards the economy, infrastructural problems, cost rise, delay inwards unloosen of sanctioned limits past times banks, delays inwards settlements of payments past times government, natural calamities, etc.