Financial Stability Report

A non performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
Banks classify NPAs further into Substandard, Doubtful and Loss assets.
- Substandard assets: Assets which have remained NPA for a period less than or equal to 12 months.
- Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months.
- Loss assets: Loss asset is considered noncollectable and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.

With respect to agriculture, a loan granted for short duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for two crop seasons.
A loan granted for long duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for one crop season.

CRAR, also known as Capital Adequacy Ratio (CAR), is the capital needed for a bank measured in terms of the assets or loans disbursed by the banks. It measures capital adequacy in terms of riskiness of the assets or loans given.

CAR = (Tier I + Tier II + Tier III (Capital funds)) /Risk weighted assets)

According to the RBI’s capital adequacy norms, banks (including RRBs) are required to maintain CRAR at 9%.

The gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) could worsen to as high as 14.7% by the end of the current financial year, from 8.5% in March 2020, if the adverse economic impact of the COVID-19 pandemic was ‘very severe’.
Observing that the capital to risk-weighted assets ratio of SCBs edged down to 14.8% in March, from 15% in September 2019, the RBI projected that this ratio could slide to 13.3% in March 2021 under the baseline scenario and to 11.8% under the very severe stress scenario.
Bank credit which had considerably weakened during the first half of 2019-20, slid down further to 5.9% by March 2020 and remained muted up to early June 2020.

https://www.thehindu.com/business/Economy/banks-gross-npas-may-climb-to-as-much-as-147-by-march-rbi/article32183499.ece

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