9. What are NPA?
A nonperforming asset (NPA) refers to a classification for loans on the books of financial institutions that are in default or are in arrears on scheduled payments of principal or interest. Once the borrower has failed to make schedule principal or interest payments for 90 days the loan is considered to be a NPA. Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets. 1. Substandard assets: Assets which has remained NPA for a period less than or equal to 12 months. 2. Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. 3. Loss assets: As per RBI, "Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value."
