Learn Everything About Non Performing Assets
Every business requires capital at various stages for running & growing the business. So besides promoter capital businesses raise capital in the form of loans from the banks & NBFC. Businesses make a profit by infusing these loans in their business model in the shape of working capital limits or term loans for developing infrastructure or purchasing machinery. Banks also make a profit by selling loans to these businesses, so loans also called assets for the banks earn interest/profit for the bank. But what if these loans will not be repaid by borrowers/businesses? Banks categorized this irregularity in repayment in the following and also define these loans as Special Mention Accounts. Special Mention Account (SMA) refers to an account that exhibits signs of potential credit weakness or is at risk of becoming a non-performing asset (NPA). Special Mention Accounts are typically classified into three categories: SMA-0, SMA-1, and SMA-2. SMA-0 represents the lowest level of risk in which payment is overdue under 30 days SMA-1 indicates a moderate level of risk in which payment is overdue more than 30 days SMA-2 represents the highest level of risk in which payment is overdue more than 60 days But if a loan account goes beyond the capacity of Special Mention Accounts, that particular loan account is declared as Non Performing Asset(NPA). In such conditions, you can avail NPA Finance from Fund Source India to close your NPA Account and all legal litigations associated with it. NPA Full Form in Banking – The full form of NPA is Non Performing Assets What is Non Performing Assets? When a borrower defaults on his monthly repayments for more than three months or 90 days, then this stops generating income for the bank then the bank classifies this particular defaulted loan account as Non Performing Asset (NPA). NPA Meaning: More precisely, as per RBI(Reserve Bank of India) policy any account which defaulted on its repayment equivalent or more than 90 days, that account is considered a non performing asset. NPAs directly affect the financial health and stability of banks. When a loan’s assets become non performing(NPA), which leads to a decline in the bank’s profitability, asset quality, and capital adequacy. Higher levels of NPAs can weaken a bank’s balance sheet and effects its ability to lend and its ability to support economic growth. There are different types of NPA as per banking policies: Types of NPA: NPA accounts are categorized on the basis of their existence as NPA accounts or the duration for which they remain as NPA accounts. NPA accounts are categorized in the following terms/ways: What are the reasons for NPA :
