Non-performing asset

From Wikipedia, the free encyclopedia

Jump to: navigation, search
The examples and perspective in this article deal primarily with India and do not
represent a worldwide view of the subject. Please improve this article and discuss
the issue on the talk page. (December 2010)

This article does not cite any references or sources.

Please help improve this article by adding citations to reliable sources. Unsourced material may be
challenged and removed. (March 2009)

Non Performing Asset means an asset or account of borrower, which has been classified by a
bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the
directions or guidelines relating to asset classification issued by The Reserve Bank of India.
[edit] Ninety days overdue
With a view to moving towards international best practices and to ensure greater transparency, it
has been decided to adopt the '90 days overdue' norm for identification of NPAs, from the year
ending March 31, 2004. Accordingly, with
1. interest and /or installment 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, inrespect 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 installment 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
purpose, and
[edit] Out of order
An account treated as 'out of order' if the outstanding balance remains continuously in excess of
the sanctioned limit/ drawing power. In case where the outstanding balance in the principal
operating account is less than the sanctioned limit/ drawing power, but there are no credits
continuously for six months as on the date of balance sheet or credits are not enough to cover the
interest debited during the same period, these account should be treated as 'out of order'.it is
called out of order
What Does Nonperforming Asset Mean?
A debt obligation where the borrower has not paid any previously agreed upon interest and principal
repayments to the designated lender for an extended period of time. The nonperforming asset is therefore
not yielding any income to the lender in the form of principal and interest payments.

Investopedia explains Nonperforming Asset

For example, a mortgage in default would be considered non-performing. After a prolonged period of non-
payment, the lender will force the borrower to liquidate any assets that were pledged as part of the debt
agreement. If no assets were pledged, the lenders might write-off the asset as a bad debt and then sell it
at a discount to a collections agency.

nonperforming asset

Definition
A loan or lease that is not meeting its stated principal and interest payments. Banks
usually classify as nonperforming assets any commercial loans which are more than 90
days overdue and any consumer loans which are more than 180 days overdue. More
generally, an asset which is not producing income.

Read more: http://www.investorwords.com/3329/nonperforming_asset.html#ixzz1HxHAqL8V