Essay on Non-performing Assets (NPA) | NPA Essay | Essay on NPA

November 13, 2022

NPA Essay | Essay on Non-performing Assets | Essay on NPA

Essay on NPA or Non-performing Assets is one of the most important essay topics for banking exams as well as other competitive exams. Here we have written essay on npa or essay on non-performing assets which is most important for IBPS PO Mains Exam descriptive paper, SBI PO Mains Descriptive Paper and other banking exams. Lets see essay on NPA.

Essay on Non Performing Assets (NPA)

Banks or financial institutions provide loan to its customer and in return they receive interest. Generally, loan is returned by customer in fixed monthly installment called EMI. EMI or Equated Monthly Installment is a part of the equally divided monthly outgoes to clear off an outstanding loan within stipulated time. It is a combination of some part principal and accumulated interest during the month. When customer does not pays EMI on the time, account shows overdue and if he is unable to pay the EMI for a specified period of time generally 90 days the loan is specified as NPA.

What is NPA or non-performing assets?

In simple terms, a loan or advance for which the principal or interest payment remained overdue for specified period generally 90 days is known as non-performing assets (NPA). Further bank classifies NPAs into three categories:

Sub-standard Assets
Doubtful Assets
Loss Assets

Sub-standard Assets

As per RBI norms, a loan or advance which remained NPA for a period of less than or equal to 12 months is classified as Sub-standard Assets

Doubtful Assets

A loan or advance which remained NPA for a period exceeding 12 months is classified as doubtful assets.

Loss Assets

When a loss has been identified by the bank or auditors or Co-operation Department or by RBI inspection but the amount has not been written off, wholly or partially, the assets would be classified as Loss Assets.

Growing non-performing assets (NPA) are not good for lender institutions as well as economy of the country. Therefore, while sanctioning loan, banks check the loan payment capability of borrowers so that NPA can be minimized.