NPA Full Form
NPA Full Form-What is NPA? NPAis a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
NPA Full Form is mentioned below :
|Non Performing Asset|
What is NPA?
A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. Description: Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets. The Supreme Court on Monday directed banks to identify wilful defaulters and file a fresh list within four weeks, while asking the Centre to fix the responsibility of banks in the present 1.77 lakh cases. A bench headed by Chief Justice Dipak Misra also directed the banks to file an affidavit on the assessment and resolution of these cases within a week. The apex court is hearing petitions filed by businesses against banks and their other stakeholders that have been making exorbitant recovery in the interest of public funds.
Categories of NPAs :
In practice, the way loans are classified is done by various banks on their own. Among various factors, the “feasibility and suitability” of the projects, ‘Gross Fixed Assets Ratio’, etc., are taken into consideration. The banks evaluate a loan given by the borrower to assess the risk that the loan will default in some way. How many NPAs are there? Every lender monitors its NPAs.
In case of banks, NPAs in each stage – phase I, II, III, IV and C are classed. Phase I (funded or unfunded) are loans given for projects (usually limited- period bonds or loans with a reasonable cost of refinancing). Phase II (available- for- or committed) are loans for projects or firms which are viable, and have enough earnings to meet the interest and principal commitments.
What is the difference between a Non Performing Asset and a Loan?
A Non Performing asset is classified as a loan, whose value has not improved or otherwise fallen in the following months, but the interest and principal are still due or payable. A Loan is a loan which has started to yield interest and principal and is under its maturing phase and has the owner’s ability to make payment, however due to a variation in business conditions, economic or political reasons, the borrower is unable to pay off the loan. The loan remains unpaid as per the terms and conditions of the loan. According to media reports, Union Bank of India’s gross NPA (including those under review) was Rs 55,671 crore as of 31 March 2018, which is 12.34% of the total loans.
What does a Non Performing Asset mean for me?
With a NPA, you are faced with a problem. The banks do not want to give the loans and the borrowers will take it back and create huge losses for the banks and will also make it difficult for the banks to offer more loans. Are you in trouble? There are things which banks are required to report to the RBI. In fact, an internal vigilance team may flag certain issues. Some of them could be erroneous reporting or documentation. In such cases, the bank may take some corrective measures for certain loans, but the reports need to be made in a timely manner. It is in these reports where you find errors in the NPA classification. These reports are sent to RBI for their monitoring. If you have NPA on your books, the onus of action would be on you to make payments to the banks.
Chances of you defaulting on a loan are higher when you don’t have a balance due in your bank account, less when you have minimum money in your bank account, and lastly when your regular cash flows in your business are still intact.