NPA
About loaning system
Bank gives loan to people for bank it is liabilities for loan taker because loan taker will give money that he/she borrowed from bank with interest but for bank it is asset because bank will get money in future with interest.
If the intaller means loan taker or borrower didn't do intallment for 90 for bank it is called called non performing asset or NPA. Loan is income for bank because person have to give all borrowed money with interest that is income for bank but when he get no income from bank it is called NPA.
NPA can be classified into 3 part
Substandard asset- if a loan installment date is delay for 12 months or less it is called substandard asset for bank.
Doubtful assest- if a loan installment date is delay for 12 months or more it is called doubtful asset. They have very small chances to give the installment.
Loss asset- if a loan installment date is delay for 2 years it called loss asset in other words these asset are uncollectable.
Money Overdraft NPA
Overdraft is a facility that is generally provided by bank in current account it is a facility that person can withraw more money that is not available in person's account. There is limit of overdraft and this limit is decided by bank. If you don't give overdraft money for 90 days it is called also NPA for bank.
How bank recover Loan's money
1.By the sell of collateral.
2.Bank recover money from company by NCLT (national company law tribunal) from it bank get money by liquidation of company, selling assets of company or selling the whole company. If loan is unsecured means bank give loan without collateral that is known as personal loan in this loan, for bank it is hard to Pay off person. Bank have to focus how to do less NPA because it affect bank financially. If you invest in stock market for investing in bank you have to check NPA report of bank it is a good tool to analyze banks' financial conditions.
We hope now you understand the meaning of NPA.
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