dmpq-Define Non performing assets ? Critically evaluate India’s bad loan problem.

Any asset which stops giving returns to its investors for a specified period of time is known as Non-Performing Asset (NPA). Generally, that specified period of time is 90 days in most of the countries and across the various lending institutions. However, it is not a thumb rule and it may vary with the terms and conditions agreed upon by the financial institution and the borrower.

nterest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan. The account remains ‘out of order’ in respect of an Overdraft/Cash Credit (OD/CC). The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted.

More than Rs. 7 lakh crore worth loans are classified as Non-Performing Loans in India. This is a huge amount. The figure roughly translates to near 10% of all loans given. This means that about 10% of loans are never paid back, resulting in substantial loss of money to the banks. When restructured and unrecognised assets are added the total stress would be 15-20% of total loans.

NPA crisis in India is set to worsen. Restructuring norms are being misused. This bad performance is not a good sign and can result in crashing of banks as happened in the sub-prime crisis of 2008 in the United States of America. Also, the NPA problem in India is worst when comparing other emerging economies in BRICS.


APSC Notes brings Prelims and Mains programs for APSC Prelims and APSC Mains Exam preparation. Various Programs initiated by APSC Notes are as follows:- For any doubt, Just leave us a Chat or Fill us a querry