NPA – Management and Resolutions- An asset of a bank turns into a non-performing asset (NPA) when it stops generating regular income such as interest etc for the bank. An asset is classified as non-performing if any amount of interest or principal installments remains overdue for more than 90 days, in respect of term loans. The banking area is the firmness of a country’s economy and immediately affects its development. In order to guarantee continued growth, it is critical that the banks and financial institutions are robust in maintaining the stress, particularly created by Non-performing assets (NPAs) or bad loans.
While NPAs are a natural fall-out of undertaking banking business and hence cannot be completely avoided, high levels of NPAs can severely erode the bank’s profits, its capital, and ultimately its ability to lend further funds to potential borrowers.
At the macro level, a high level of nonperforming assets means choking off credit to potential borrowers, thus lowering capital formation and economic activity. So the challenge is to keep the growth of NPAs under control.
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