Q&As

Assets for a bank are the loans it has given and investment made by the bank. Most important assets for banks are loans given by it. Similarly, banks make investment in government securities by purchasing them.

Usually, the health as well as the financial condition of a bank is measured through the proportion of bad assets or Non Performing Assets with it.

Simply, NPA indicates the amount of loan that was not returned by the customer. An asset becomes non-performing when it ceases to generate income for the bank.

As per the current norm, if a loan is overdue during the last 90 days, it will be categorized as a Non Performing Asset (NPA). A loan whose interest and / or installment of principal have remained ‘overdue due’ for a period of 90 days is thus considered as NPA. Overdue is a situation where the loan is not paid by the due date fixed by the bank.

From the banks’ health point of view, higher the NPA, lower will be its health. Attempt to strengthen a bank is mainly concentrated on NPA management.

Some of the assets of the banks may not have returned or were not repaid for a considerable point of time. Here, to measure the seriousness of repayment delay, assets are classified into different categories.

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