NPA (Non Performing Assets) in banks

A non performing asset is one which is not yielding any interest earning as per directives of RBI. Banks are not allowed to book interest on the loanS accounts which have become NPA until it is upgraded. Banks have to classify their loan accounts in following 4 categories. accounts which are not under first category i.e.standerd category is NPA. Al following 3 categories of accounts are classified in NPA category.

1. Standard Assets

Standard assets are those, which are regular in payment of interest and installment due as per sanction. They are normally treated as accounts without any problems. These accounts are monitored to ensure the compliance of all terms and conditions specified in the sanction.

2. Sub-standard Assets

With effect from 31 March 2005, a sub-standard asset is one, which has remained NPA for a period less than or equal to 12 months. If the entire over dues are recovered by way of cash recovery, the account can be upgraded to standard category immediately. Similarly,
if an account is classified as NPA due to technical reasons, the account shall be upgraded on clearance of technical reasons.
3. Doubtful Assets
With effect from March 31, 2005, an asset is classified as doubtful if it remained in the sub-standard category for 12 months.
Sub-standard and Doubtful accounts which are subjected to restructuring / rescheduling, can be upgraded to standard category only after a period of one year from the date when first payment of interest or of principal, whichever is earlier, falls due, subject to satisfactory performance for the period of 12 months.

4. Loss Assets

A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection. In Loss assets, realizable value of security available is less than 10 % of balance outstanding / dues.
Willful Defaulter
Accounts of Rs 25 lacs and above can be classified as willful defaulter if any