The Non in a Non Performing Assets carries a negative significance. And this negativity is succumbing banking sector. A Non performing asset is a assets which do not perform i.e. don’t bring return.
Banks assets are the loans and advances given to customer. If a customer do no pay interest or part of principal or both the loan is termed as bad loan. According to RBI term loan on which interest or instalment remains overdue for 90 days. NPAs are typically listed on the balance sheet of banks .Banks classify these into -1) Sub Standard( NPA less than 12 months) 2) Doubtful assets(NPA more than 12 months) 3) Loss assets( identified by bank auditor or inspector)
Recently Pnb and Sbi Scam indicates that how these well stable banks succumb into this crisis. There are factors related to Npa issue .External factor- Wilful defaulters who don’t want to return money. There can be business failure which impedes borrower to return money to banks. Change in government policies also results the same. Natural calamities and ineffective recovery tribunal can cause this menace. Internal factors- Ineffective lending process. Poor credit appraisal system and outdated technology also complement to this menace.
Economic survey proposed steps 4Rs resolution of Npa crisis – Recogintion, Re-capitalisation, Resolution, Reforms can be used. Reforms in insolvency and bankruptcy code keeping current changes in minds.Steps to discourage wilful defaulters. And amendment of prevention and corruption acts is needed.
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