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RBI on NPA
April 21 , 2020
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- According to the RBI's latest announcement, the bad loan classification period now changes from 90 days to 180 days for all such accounts.
- The 90-day NPA norm shall exclude the moratorium period.
- There would be an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020.
- To ensure that loans given to real estate projects, the RBI provided an extension of another year before they are recognised as NPAs.
About NPA
- A nonperforming asset (NPA) refers to a classification for loans or advances that are in default or in arrears.
- A loan is in arrears when principal or interest payments are late or missed.
- A loan is in default when the lender considers the loan agreement to be broken and the debtor is unable to meet his obligations.
- In most cases, debt is classified as nonperforming when loan payments have not been made for a period of 90 days.
- Nonperforming assets are listed on the balance sheet of a bank or other financial institution.
- After a prolonged period of non-payment, the lender will force the borrower to liquidate any assets that were pledged as part of the debt agreement.
- If no assets were pledged, the lender might write-off the asset as a bad debt and then sells it at a discount to a collection agency.
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