Q. Which one of the following statements is correct regarding Gross Non-Performing Assets (GNPA) ratio?

[A] It evaluates a bank operational efficiency by comparing its operating expenses to its revenue.

[B] It measures a bank profitability by evaluating its net income in relation to its total assets.

[C] It represents the proportion of a bank total loan book that is classified as non-performing.

[D] It measures the ratio of a loan amount to the appraised value of the collateral provided by the borrower.

Answer: C
Notes:

Explanation – The Gross Non-Performing Assets (GNPA) ratio is a financial indicator that represents the proportion of a bank’s total loan book that is classified as non-performing. In other words, it is the ratio of the total value of non-performing assets (such as bad loans) to the total value of gross advances (total loans extended by the bank). The GNPA ratio is commonly used to assess the asset quality and financial health of a bank. A higher GNPA ratio indicates a higher level of non-performing assets, which may pose risks to the bank’s stability.

Source: Forum IAS

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