Her project is about NPAs in banks. Guide her properly by explaining the concept of NPA.

Question

D is an MBA student specializing in Banking and Finance and has no prior working experience in any field. Her project is about NPAs in banks. Guide her properly by explaining the concept of NPA.

Answer 1

The banks have to classify their advances into four broad groups :

(i) standard assets, 

(ii) sub-standard assets, 

(iii) doubtful assets and 

(iv) loss assets. 

• Standard asset is one which does not disclose any problems and which does not carry more than normal risk attached to the business. 
• Such an asset is not a NPA Sub-standard asset is one which has been classified as NPA for a period not exceeding 12 months. A loss asset is or 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 partly