Page 229 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes This is because of several policy measures taken by the RBI in conjunction with the
Government.

However, the level of NPAs in Indian banks is still higher as compared to those of other
countries. As such, strategic measures both at macro and micro levels need to be taken.
It is gratifying to note that in the recent few years, the Government and the RBI have
initiated several concrete measures which are now showing positive results.

13.9 Keywords

Doubtful Assets: These are those assets which are considered as non-performing for period of
more than 12 months.

Funds: A sum of money saved or made available for a particular purpose.
Loss Assets: All those assets which cannot be recovered.
Misappropriation: The fraudulent appropriation of funds or property entrusted to your care but
actually owned by someone else.
Non-performing Assets (NPA): A debt obligation where the borrower has not paid any previously
agreed upon interest and principal repayments to the designated lender for an extended period
of time then such loans become non-performing assets.

Provision: The action of providing or supplying something for use.
Salvage Value: The estimated value that an asset will realize upon its sale at the end of its useful
life.

Standard Asset: Standard assets generate continuous income and repayments as and when they
fall due.
Sub-standard Assets: All those assets (loans and advances) which are considered as non-performing
for a period of 12 month.

13.10 Review Questions

1. What are NPAs? Why should they be managed?
2. What are the primary factors responsible for non-performing assets in commercial banks
in India?
3. Make a critical analysis of recent trends in NPAs in Indian commercial banks.
4. How have NPAs affected financial health of Indian commercial banks?

5. What measures have, of late, been taken to contain NPAs in commercial banks in India?
What has been its impact on level of NPAs of the banks?
6. What is SARFAESI Act? How far has this legislative been effective in containing NPAs of
the banks?

Answers: Self Assessment

1. 1st April 1991. 2. Non-productive assets.
3. Over 5 percent 4. 1985-86
5. Two years. 6. 12 months.

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