What is NPA in BANKING?
NPA in terms of RBI regulations result out of non-payment of interest for a period of 90 days or non-payment of principle amount for 90 days or more. So beyond that point, it is called Non-Performing Asset. The loan is taken by the company on its assets from the bank. When the asset is not performing because they become doubtful and NPAs from doubtful become bad loans.
Before the period of 90 days, they are calledStressed Assets.Stressed assets= NPAs + restructured loans + Written Off Assets.
Types of stressed Assets:
Sub-standard Assets-If borrower fails to repay the installment, interest on principal or principal for 90 days the loan becomes NPA and it is termed as Special Mention Account (SMA). If it remains SMA for a period less than or equal to 12 months it is termed as Substandard Assets.
Doubtful Assets-If the Sub-standard assets remains so for 12 months or more, then it would be termed as Doubtful Asset.
Loss Assets-If the loan is not repaid even after it remains substandard for more than three years it would be called as loss Asset.
Written Off Assets-Written off assets are those on which the bank or lender doesn’t count the money borrower owes to it.