What are the three categories of NPA?

Banks are required to classify nonperforming assets into one of three categories according to how long the asset has been nonperforming: sub-standard assets, doubtful assets, and loss assets.

What is the difference between performing and non-performing loans?

A non-performing loan is a debt on which the borrower is late on making payments or is in danger of missing payments. Loans where the borrower is 90 days late on payments are considered non-performing, but any loan in default or near default may also be called non-performing.

How do you avoid non-performing loans?

The answer to how to reduce NPLs would also be to use a robust internal risk rating model and to try to put all low rated loans on declining exposure. Getting aggressive on collections and selling the paper at a loss could also be considered. A new approach may be required to reduce NPLs.

What is difference between gross NPA and net NPA?

Summary of Gross NPA and Net NPA Gross non-performing assets refer to the sum of all the loans that have been defaulted by the borrowers within the provided period of ninety days while net non-performing assets are the amount that results after deducting provision for unpaid debts from gross NPA.

How is NPA calculated?

By dividing non performing assets by total loans will give the NPA ratio in decimal form. Multiply by 100 to get the NPA percentage.

What are the main causes of non-performing loans?

The main causes of NPL are high-interest rate, Low GDP, Poor credit appraisal, Inflation, unemployment and improper lending disbursement to agriculture sector. NPL have negative impact on the economy and financial institutions.

How are non-performing loans calculated?

NPL Ratio Calculation The calculation method for the NPL ratio is simple: Divide the NPL total by the total amount of outstanding loans in the bank’s portfolio. The ratio can also be expressed as a percentage of the bank’s nonperforming loans.

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