What are NPAs? Which Accounts Are Classified as NPA? When an Account is termed as Non Performing Asset?

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An account is declared as NPA based on the recovery of installments and interest on loans and advances and other aspects as per RBI norms. The updated norms to declare the account as NPA are as follows as per RBI guidelines:-

An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.

A non performing asset (NPA) is a loan or an advance where;

Interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,

  • Interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,

  • The account remains ‘out of order’ in respect of an Overdraft/Cash Credit (OD/CC), if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit / drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out of order'.

  • The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

  • The installment of principal or interest thereon remains overdue for two crop seasons for short & long duration crops,

  • The installment of principal or interest thereon remains overdue for two crop seasons for short & long duration crops,

  • In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

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