Nov. 28, 2018

According to RBI, both gross and net Non-Performing Assets (NPAs) of scheduled commercial banks have reduced in the two quarters ending September 30, 2018 since their peak in March 2018, due to the concerted efforts taken by the government and the central bank to address the problem.

Non-Performing Assets (NPAs):

  • Definition: 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.

  • Types: Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.
    • Substandard assets: Assets which has 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.

    • Lost assets: An asset that is an NPA for a period of more than 36 months, but the amount has not been written off wholly is treated as a lost asset. In other words, such an asset is considered uncollectible.

Present scenario:

  • The data shows that gross NPAs of all scheduled commercial banks were at ₹10.36 lakh crore at the end of the March 2018 quarter, and subsequently declined to ₹10.14 lakh crore by the end of the September quarter.

  • Public sector banks accounted for 85.9% of all gross NPAs of scheduled commercial banks by September 30, 2018.

  • The annualised slippage ratio (i.e. the percentage of fresh NPAs as percentage of standard advances at the beginning of the quarter) has also witnessed a declining trend over the past two quarters, which is again reflective of the improving credit discipline.

Source : The Hindu