1. Presented BY:Anu Mishra MBA 3rd Sem BU 1

2. Presented BY: Anu Mishra
M.B.A 3rd sem
Presented BY:Anu Mishra MBA 3rd Sem BU
B.U
2

3. Meaning
• A NPA is a loan or an advance where;
– A credit facility is considered non-performing when it
ceases to generate income for the bank.
– Interest and/ or installment 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
– The bill remains overdue for a period of more than 90 days
in the case of bills purchased and discounted
– The installment or interest remains overdue for two crop
seasons in case of short duration crops and for one crop
season in case of long duration crops
Presented BY:Anu Mishra MBA 3rd Sem BU 3

4. Presented BY:Anu Mishra MBA 3rd Sem BU 4

5. Classification of NPA
• Standard Assets - which do not disclose any
problem and do not carry more than the normal
risk attached to the business.
• Substandard Assets – Which has remained NPA
for a period less than or equal to 12 months.
• Doubtful Assets – Which has remained in the sub-
standard category for a period of 12 months
• Loss Assets – 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 or part.
Presented BY:Anu Mishra MBA 3rd Sem BU 5

6. Why Loan accounts go bad ?
BORROWER-SIDE BANKER – SIDE
• Lack of Planning • Defective Sanction
• Diversion of Funds • No post-sanction
supervision, etc
• Disputes within
• Delay in releases
• No contribution • Directed lending …
• No modernization • Slow decision making
• Improper monitoring process
• Industrial Relations
• Natural Calamities
Presented BY:Anu Mishra MBA 3rd Sem BU 6

7. Few Exception to NPA:
• Housing loans to staff members.
• Project finance.
• Credit facilities guaranteed by Government.
• Advances affected by natural calamity.
• NSCs,KVP,IVPs
Presented BY:Anu Mishra MBA 3rd Sem BU 7

8. IMPACT OF NPAS ON OPERATIONS
• Drain on Profitability.
• Impact on capital adequacy.
• Adverse effect on credit growth as the
banker’s prime focus becomes zero percent
risk and as a result turn lukewarm to fresh
credit.
• Excessive focus on Credit Risk Management.
• High cost of funds due to NPAs.
Presented BY:Anu Mishra MBA 3rd Sem BU 8

9. NPA MANAGEMENT – PREVENTIVE
MEASURES
• Formation of the Credit Information Bureau (India)
Limited (CIBIL)
• Release of Willful Defaulter’s List. RBI also releases a
list of borrowers with aggregate outstanding of Rs.1
crore and above against whom banks have filed suits
for recovery of their funds
• Reporting of Frauds to RBI
• Special mention accounts for early identification of
bad debts.
• Risk assessment and Risk management
Presented BY:Anu Mishra MBA 3rd Sem BU 9

10. Presented BY:Anu Mishra MBA 3rd Sem BU 10