A non-performing asset is a loan for which the interest and/ or instalment of principal has remained ‘past due’ for a specified period of time. According to RBI, a non-performing asset (NPA) shall be a loan or an advance where;
1) interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan,
2) the account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),
3) the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
4) interest and/or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
5) any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
NPAs can be further classified into:
Substandard assets: NPA for a period less than or equal to 18 months.
Doubtful assets: NPA for a period exceeding 18 months.
Loss assets: A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.
