RBI’s annual Trend and Progress of Banking in India report for the financial year 2022-23, showed that the gross non-performing assets (GNPA) ratio fell to 3.9 per cent in 2022-23
Reasons for Non-Performing Assets
- Defective Lending Process
- Willful Defaults:Â
- Industrial sickness:
- Regulatory violation
- Frauds by banker and borrower
About Non- Performing Assets (NPA)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): It allows secured creditors to take possession of collateral, against which a loan had been provided, upon a default in repayment.Â
- A NPA refers to a classification for loans or advances of a bank that are in default or arrears.
- A loan is in arrears when principal or interest payments are late or missed and becomes an NPA when the interest and/ or instalment of principal remain overdue for more than 90 days.Â
- GNPAs are the sum of all loan assets that are classified as NPAs.Â
- Debt Recovery Tribunals: Established under the Recovery of Debts and Bankruptcy Act, 1993 provide for the establishment of Tribunals for expeditious adjudication and recovery of debts.Â
- Insolvency and Bankruptcy Code (IBC), 2016: For reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner i.e. within 180 days or the extended period of 90 days.Â
- National Asset Reconstruction Company (NARCL): It aims to reduce NPAs of banks, improving financial system stability and efficiency. o It is incorporated under the Companies Act 2013 with PSBs holding a majority stake.Â
- Indradhanush plan for revamping PSBs, envisaging infusion of capital in PSBs.Â
NPAs Classification
- Substandard assets: NPA for a period less than or equal to 12 months
- Doubtful assets: Remained in the sub-standard category for more than 12 months
- Loss assets: Loss had been identified by the Company or by the internal or external auditor or by RBI, but the amount had not been written off wholly.
