Bank NPAs likely dropped in FY21

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 uncollectible 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.

According to a recent report of Care Ratings, a Credit Rating Agency, the quantum of gross non-performing assets (GNPAs) of scheduled commercial banks (SCBs) is expected to decline by the end of March, despite being a challenging year, compared with FY20.
Stating that public sector banks (PSBs) accounted for more than 80% of SCBs’ GNPA till FY19, the report said more than the past years, the PSBs had registered a substantial contraction in GNPAs.
The PSB GNPA ratio continues to remain significantly higher than the private banks.

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