What is NPA?

 What is NPA? mostly asked in financial sectors, since RBI describe it in very simple and very clear manner that an asset, including a leased asset, "become non performing when it seases to generate income for bank."    

Please find below details as mentioned on RBI (definition)  page...

                               Non ­performing Assets

Here RBI describing that an asset, including a leased asset, becomes non­ performing when it ceases to generate income for the bank. A non ­performing asset (NPA) is 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’ as indicated at paragraph 2.2 below, 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. The instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,

V. The instalment of principal or interest thereon remains overdue for one crop season for long duration crops,

VI. The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction undertaken in terms of guidelines on securitisation dated February 1, 2006.

VII. In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

As per RBI  "Banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter".Definition as per RBI