NPA Meaning & Criteria
NPA Meaning & Criteria
A Non-performing asset (NPA) is defined as a credit facility in respect
A Non-Performing Asset (NPA) is a credit facility in which the interest and/or installment of principal has remained overdue for a specific period.
In simple terms, it refers to loans that are at risk of default.
When a borrower fails to make interest or principal payments for 90 days or more, the loan is classified as a Non-Performing Asset.
As per RBI guidelines (effective from March 31, 2004), an NPA is a loan or advance where:
of which the interest and/or installment of finance principal has remained ‘past due’ for a specified period of time. NPA is used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non performing asset. Accordingly, with effect from March 31, 2004, a non performing asset (NPA ) is a loan or an advance where:
- Interest and/or instalment of principal remain overdue for more than 91 days in respect of a term loan.
- The account remains ‘out of order’ for more than 90 days in case of Overdraft/Cash Credit (OD/CC).
- Any bill remains overdue for more than 90 days in the case of bills purchased and discounted.
- Interest and/or instalment of principal remain overdue for two harvest seasons, but not exceeding two half-years, in agricultural advances.
- Any amount remains overdue for more than 90 days in respect of other accounts.
- Non-submission of stock statements for three consecutive quarters in case of cash credit facilities.
- No active transactions for more than 91 days in Cash Credit / Overdraft / EPC / PCFC accounts.
Effects of NPA
When an account turns into an NPA, it has a significant impact on the borrower’s financial health and business operations.
- Day-to-day operations become difficult as banks start adjusting deposited funds against loan dues.
- The relationship between the borrower and the bank shifts from business-based to debt-recovery-based.
- The borrower’s focus moves from business revival to arranging funds to service the loan.
- Reputation and creditworthiness are adversely affected.
Many borrowers are unaware of their legal rights under NPA laws and face extreme pressure from banks.
At NPA Consultants, we believe deserving businesses deserve a chance to revive.
Our experts help borrowers and banks find a balanced, practical solution through negotiation, legal strategy, and business restructuring.
Success Mantra to handle the NPA situation
- Don’t wait until the problem arises.
- Seek professional guidance to understand your rights as a borrower.
- Don’t succumb to bank pressure.
- Stay focused on your business operations and growth.
- Avoid over-commitments made out of fear of the “NPA” tag.
- Safeguard your valuable assets.
- Explore funding options under expert guidance.
- Aim to settle with the bank on reasonable terms rather than panic decisions.
Remember: Non-Performing Assets affect financial flexibility and business growth.
Seek expert assistance early to manage and resolve NPAs effectively.
