An asset, including a leased asset, becomes non-performing when it
ceases to generate income for the bank. A ‘non-performing asset’
(NPA) was defined as a credit facility in respect of which the
interest and/or installment of principal has remained ‘past due’ for a
specified period of time. The specified period was reduced in a
phased manner as under :
1993 four quarters
1994 three quarters
1995 onwards two quarters
3. With a view to moving towards international best practices and to
ensure greater transparency, it has been decided to adopt the ’90 days’
overdue’ norm for identification of NPAs, from the year ending March
31, 2004. Accordingly, with effect from March 31, 2004, a non-performing
asset (NPA) shall be a loan or an advance where;
i. interest and/ or installment of principal remain overdue for a
period of more than 90 days in respect of a term loan,
ii. the account remains ‘out of order’ for a period of more than 90
days, in respect of an Overdraft/Cash Credit (OD/CC),
iii. the bill remains overdue for a period of more than 90 days in
the case of bills purchased and discounted,
iv. interest and/or installment of principal remains overdue for two
harvest seasons but for a period not exceeding two half years in
the case of an advance granted for agricultural purposes, and
v. any amount to be received remains overdue for a period of
more than 90 days in respect of other accounts.
5. Substandard Asset: Substandard asset is one which has
remained NPA for a period less than or equal to 18 months.
Doubtful Asset: Doubtful asset is one which has remained NPA
for a period exceeding 18 months.
Loss Asset: A loss asset is one where loss has been identified
by the bank or internal or external auditors or the RBI
inspection but the amount has not been written off wholly. In
other words, such an asset is considered uncollectible and of
such little value that its continuance as a bankable asset is not
warranted although there may be some salvage or recovery
Standard Direct Advances to Agriculture & SME Sectors 0.25
Commercial Real Estate Advances 1.00
All other Loans & Advances not included in above 0.40
Sub-standard Secured Exposure (up to 6 months)
-6 months to 1 year
Unsecured Exposure for Escrow A/cs available in
case of Infrastructure lending, infrastructure loan
accounts (up to 6 months)
-6 months to 1 year
Other Unsecured Exposure (up to 6 months)
-6 months to 1 year
Particulars Provision Required
Doubtful - Secured Unsecured
D1 (Up to 2 year) 40 100
D2 (3rd and 4th year) 100 100
D3 (5th year onwards) 100 100
Loss Asset 100
9. BORROWER WISE & NOT
•When a loan a/c of a borrower is treated as NPA, all the other loan a/c
of the borrower, even if they are otherwise regular, should be treated as
NPA as NPA classification should be borrower wise & not facility
•When various advance a/c of a borrower are in different categories of
NPA, then the provisioning shall be as per the lowest category
10. Reporting Format for Non-Performing
Asset – Gross and Net Position
Name of the Bank:
Position as on ....................
(rupees in crore up to two decimals)
1. Gross advances *
2. Gross NPAs *
3. Gross NPAs as a percentage of gross advances
4. Total Deductions (i+ii+iii+iv)
i) Balance in Interest Suspense account$
ii) DICGC/ECGC claims received and held pending adjustment
iii) Part payment received and kept in suspense account
iv) Total provisions held **
5. Net advances (1-4)
6. Net NPAs (2-4)
7. Net NPAs as a percentage of net Advances
*excluding Technical write off of Rs. ………. crore.
** excluding amount of technical write off (Rs…….. …crores) and provision on standard assets (Rs………..crore)
$ banks which do not maintain an Interest Suspense account to park the accrued interest on NPAs, may furnish the amount of
interest receivable on NPAs as a foot note to this statement
11. NPA of the banks, especially PSBs have been going up sharply
The Gross NPA of the listed banks rose 35.2% to 2.43 crore lakh crore
during the first three quarters of 2013-14. in absolute terms, the 40
listed banks added ₹63,386 crore to their gross NPA during the nine
months till Dec,13, with the SBI the largest lender in the country,
leading with an accretion of ₹16,610 crore.
Trends in NPA – Bank Group Wise
Bank SBI Group
Clossing Balance for 11-12 1178 696 482 187 42 145 62 1429
Opening Balance for 12-13 1178 696 482 187 42 145 62 1429
Addition during 12-13 1198 772 425 128 41 87 41 1368
Recovered during 12-13 648 429 219 63 30 33 24 736
Written off during 12-13 78 17 60 42 1 40 0 120
Clossing Balance for 12-13 1650 1022 627 210 52 158 79 1940
Gross NPA as percent of Gross Advances
2011-12 3.3 2.8 4.6 2.1 1.8 2.2 2.6 3.1
2012-13 4.1 3.6 5 2 1.9 2 2.9 3.6
Closing Balance for 2011-12 593 391 202 44 13 30 14 652
Closing Balance for 2012-13 900 619 281 59 20 39 26 986
Net NPA as percent of Net
2011-12 1.5 1.4 1.8 0.5 0.6 0.4 0.6 1.3
2012-13 2 2 2 0.5 0.8 0.4 1 1.7
Trends in NPA
Public Sector Bank
Private Sector Bank
15. REASONS FOR INCREASED NPA’s
• Economic Slowdown
Economic growth slowing down & rate of interest going up sharply,
corporate have been finding it difficult to repay loans, and it add up to
•Wait and watch approach
Banks allow deteriorating asset class to go from bad to worse in the
hope of revival and often offer restructuring option to corporate.
• Poor credit assessment process
Ordinary people often complain about difficulty in getting loans, while
some large borrowers just get loans on a platter.
16. •Other factors
−Project not completed in time
−Failure of business
−Diversion of funds
17. IMPACT OF NPA
•Liquidity & Opportunity Cost
•Waste of valuable management time
•Impact on share prices
•Loss of credibility as high NPA reflect poorly on
•Gross NPA more than 10% in case of Co-op. Banks,
Supervisory Action follows & restrictions imposed.
18. HOW TO REDUCE ?
•Banks should stop “ever-greening” or repeated restructuring of
corporate debt to check the constant burging of their NPA.
Management issue of ever-greening of loans could be avoided by “not
renewing loans, particularly of corporate”.
Extending those extra helping hand can go against the financial
health of banks.
•Bank need to be more conservative in granting loans to sectors that
have been traditionally found to be contributors of NPAs.
•Banks need to go much beyond the traditional analysis of financial
statements & analyzing the history of promoters. There is a need to
incorporate significance of economic factors in credit assessment
19. •Banks need to evolve strategy through which defaulters are kept
out of system unless they honor the previous payment.
•Banks need to look at operational factors causing increasing
incidents of bad loans.
21. Lok Adalats
Small value loans up to Rs 20 lakh can be amicably settled between
the borrower and the lender using the forum of Lok Adalats.
Debt Recovery Tribunals (DRTs)
•Narasimham Committee Report I (1991) recommended the setting up
of Special Tribunals to reduce the time required for settling cases.
Accepting the recommendations, Debt Recovery Tribunals (DRTs)
•There are 22 DRTs and 5 Debt Recovery Appellate Tribunals.
•In this court, only the recovery cases of Rs.10 Lacs & above can be
22. SARFAESI ACT, 2002
•The SARFAESI Act, 2002 gives powers of "seize and desist" to banks.
Banks can give a notice in writing to the defaulting borrower requiring
it to discharge its liabilities within 60 days.
•The Act provides three alternative methods for recovery of non-performing
- Asset Reconstruction
•Bad loans with outstanding above Rs. 1.00 Lac.
•NPA loan accounts where the amount is less than 20% of the Principal
& Interest are not eligible to be dealt with under this Act.
23. NPAs OF Schedule Commercial Banks
Recovered through various channels
(4) as a %
(4) as a %
1. Lok Adalats 476073 17 2 11.8 8,40,691 66 4 6.1
2. DRTS 13,365 241 41 17 13,408 310 44 14
3.SARFAEST AcT 1,40,991 353 101 28.6 1,90,537 681 185 27.1
Total 6,30,429 611 144 23.6 10,44,636 1,058 232 21.9