Npa new

Npa new

• 1.
  NON PERMOMING ASSETS PRESENTED BY: ANISHKUMAR- 108 SAURABH NEGI -150
• 2.
  PERFORMING ASSET All thoseassets which generate periodical income are called as Performing Assets.
• 3.
  NPA (NON PERFORMING ASSET) Whileall those assets which do not generate periodical income are called as Non- Performing Assets. Banks assets are the loans and advances given to customers. If customers don’t pay either interest or part of principal or both, the loan turns into BAD LOAN.
• 4.
  CONT.. In INDIA, thetime frame given for classifying the assets as NPA is 90 days as compared to 45 days in other countries. However, in terms of Agriculture / farms Loans, the NPA is defined as under. For short duration crop agriculture loans such as paddy, jowar, bajra etc. if the loan (installments/ interest) is not paid for 2 crop seasons, it would be termed as a NPA.
• 5.
  CONT.. For long Durationcrops , the above would be 1 crop season from the due date.
• 6.
  PROVISIONING COVERAGE RATIO For everyloan given out, the banks to keep aside some extra funds to cover up losses if something goes wrong with these loans. This is called provisioning. Provisioning coverage ratio refers to the Fund to be kept aside by the banks as fraction to the loans.
• 7.
  STANDARD ASSETS If theborrower pays his dues regularly and on time; bank will call such loan as its “Standard Asset”. As per the norms, banks have to make a general provision of 0.40% for all loans and advances except that given towards agriculture and small and medium enterprise (SME) sector. However, if things go wrong and loans turn into bad loans, the PCR would increase depending up the classification of the NPA
• 8.
  CATEGORIES OF NPA Banksare required to classify non- performing assets further into three main categories (Sub-standard, doubtful and loss) based on the period for which the asset has remained non performing.
• 9.
  SUB-STANDARD ASSET If theborrower does not pay dues for 90 days after end of a quarter; the loan becomes an NPA and it is termed as “Special Mention Account”. If this loan remains SMA for a period less than or equal to 12 months; it is termed as Sub- standard Asset. In this case, bank has to make provisioning as follows: 15% of outstanding amount in case of Secured loans 25% of outstanding amount in case of Unsecured loans
• 10.
  DOUBTFUL ASSET If sub-standardasset remains so for a period of 12 more months; it would be termed as “Doubtful asset”. This remains so till end of 3rd year. In this case, the bank need to make provisioning as follows: Up to one year: 25% of outstanding amount in case of Secured loans; 100% of outstanding amount in case of Unsecured loans 1-3 years: 40% of outstanding amount in case of Secured loans; 100% of outstanding amount in case of Unsecured loans more than 3 years: 100% of outstanding amount in case of Secured loans; 100% of outstanding amount in case of Unsecured loans
• 11.
  LOSS ASSET If theloan is not repaid even after it remains sub-standard asset for more than 3 years, it may be identified as unrecoverable by internal / external audit and it would be called loss asset. An NPA can declared loss only if it has been identified to be so by internal or external auditors.
• 12.
  EXAMPLE OF NPA Wesuppose that a party was disbursed a loan on January 1, 2010. Its due date is June 1, 2010. But the party does not make a payment. So It will be an Standard Asset from January 1, 2010 till June 1, 2010 (Due Date) It will be a Special Mention Account From June 2, 2010 till August 29, 2010 (90 days) It will be Sub-standard from August 30, 2010 till August 29, 2011 It will be doubtful from August 30, 2011 till August 29, 2012 It may remain doubtful Asset for a period of 3 years, beginning from 12 months of being an NPA, but once the auditors identify it as a loss, it will be assigned a loss asset; however, the period may be anything above 3 years.
• 13.
  GROSS NPA Gross NPAsare the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on Balance Sheet date. It consists of all the non standard assets like as sub-standard, doubtful, and loss assets. It is calculated as: Gross NPAs Gross NPAs___ Gross Advances
• 14.
  GROSS NPA Total Gross NPAs has increase d from Rs.2.208 lakh cr last quarter, to Rs. 2.277 lakh cr this quarter; an increase of 3.13%.
• 15.
  NET NPA Net NPAsare those type of NPAs in which the bank has deducted the provision regarding NPAs. Net NPA shows the actual burden of banks. It is calculated as: Net NPAs Gross = NPAs – Provisions Gross Advances - Provisions
• 16.
  NET NPA Total Net NPAs asa number increased to Rs. 1.256 cr from Rs. 1.198 cr last quarter, a 4.84% increase.
• 17.
  REASONS BEHIND NPA Lackof proper pre-enquiry by the bank for sanctioning a loan to a customer. Non performance of the business or the purpose for which the customer has taken the loan. Willful defaulter. Loans sanctioned for agriculture purposes. Change in govt. policies leads to NPA.
• 18.
  EFFECTS OF NPAON BANKS & FI Restriction on flow of cash done by bank due to the provisions of fund made against NPA. Drain of profit. Bad effect on goodwill. bad effect on equity value.
• 19.
  TOOLS FOR RECOVERING NPA LOKADALATS DEBT RECOVERY TRIBUNALS (DRT) SARFAESI ACT, 2002 ASSET RECOVERY CONSTRUCTION INDUSTRY LIMITED(ARCIL) CORPORATE DEBT RESTRUCTURING (CDR)
• 20.
  RESELLING OF NPAS Ifa bad loan remains NPA for at least two years, the bank can also resale the same to the Asset Reconstruction Companies such as Asset Reconstruction Company (India) (ARCIL). These sales are only on Cash Basis and the purchasing bank/ company would have to keep the accounts for at least 15 months before it sells to other bank. They purchase such loans on low amounts and try to recover as much as possible from the defaulters. Their revenue is difference between the purchased amount and recovered amount.