What is NPA or Non Performing Assets?
As per RBI Master Circular, Non-Performing Asset (NPA) are those assets, which don’t generate any income for the lender. The NPA is an advance or a loan, where:
1. Interest and/or installment of the Principal amount is remaining overdue for a period of 90+ days (Term Loan Cases).
2. The account will be termed as ‘out of order’ (Overdraft/Cash Credit Cases).
3. The overdue bill for a period of 90+ days. (Bills Purchased and Discounted Cases).
4. The installment of principal or interest remains unpaid (For 2 crop seasons for short duration crops & For 1 crop season for long duration crops).
5. The amount of liquidity facility remains outstanding for 90+ days (Securitisation transaction).
Categories of NPAs
1. Substandard Asset: are those assets, which has remained NPA for a period less than or equal to 12 months.
2. Doubtful Assets: are those assets, which has remained in the substandard category for a period of 12 months.
3. Loss Assets: are those assets, where loss has been identified by the auditor, but the amount has not been written off wholly.
Reasons for NPAs
1. Willful defaulters.
2. Using the funds without due diligence.
3. The unethical lending practice of lenders.
4. The lack of bankruptcy code in India and sluggish legal system.
5. Natural Calamity such as floods, earthquakes, tsunami, droughts etc.
6. Global, National or Regional financial crisis (Example: 2008 Global Financial Crisis).
NPA In Banking Industry In India
Public Sector Bank
1. State Bank of India (Rs 1.86 lakh Crores)
2. Punjab National Bank (Rs 57,630 Crore)
3. Bank of India (Rs 49,307 Crores)
4. Bank of Baroda (Rs 46,307 Crores)
5. Canara Bank (Rs 39,164 Crores)
6. Union Bank of India (Rs 38,286 Crores).
Private Sector Bank
1. ICICI Bank (Rs 44,237 Crores)
2. Axis Bank (Rs 22,136 crore)
3. HDFC Bank (Rs 7,644 crore)
4. Jammu and Kashmir Bank (Rs 5,983 crore).
CapitaWorld – MSME Platform
CapitaWorld has launched a ‘Smart Loan–Disintermediation Ecosystem’, where (MSMEs) micro, small and medium enterprises can get loan ranging from ₹50,000 to ₹50 crore from banks and NBFCs. This initiative will help in lowering NPA as it works on information analytics, information transparency, synthetic intelligence. It’s free from human bias. It will assist banks and NBFCs to implement credit score self-discipline on customers.