Non-Performing Assets – a hindrance

Assets are generally considered to be valuable to any organization.

But non – performing assets are considered to be a hindrance for any banking organization. Non – performing assets, assets or securities that the banks receive from the customers for the advances provided to the respective customers. Any customer who doesn’t pay back their interest or principle for continuous 90 days can be treated as bad loans. Respective non-performing assets can be either leased/sold to get back the principle amount that has to be received from the customer.

More the non-performing assets less will be the return on equity and return on advances for any bank. These bad loans are expected to fall to 4% by March 2016 which was 4.5% at the end of September 2014, if the financial trend and economy serves better. But if the financial trend and economy moves in a downward movement, bad loans can increase upto 6.3% by March 2016. Banks like IOB has decided to focus on current account and savings account (CASA) account and to decrease the Non-performing assets (NPA) as their return on equity is just around 4.6%. So, as per the estimation if the NPAs decrease to 4% in March 2016, it is a great success as banking sector will see an unbelievable improvement in their performances.

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