Page 203 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance Mahesh Kumar Sarva, Lovely Professional University

Notes Unit 10: Non-performing Assets

CONTENTS
Objectives
Introduction

10.1 Non-Performing Assets (NPA)
10.2 Some Important Terms
10.3 Reasons for NPAs

10.4 Major factors contributing to high level of NPAs in India
10.5 Solution of NPA Problem in Indian Banks
10.6 Converting NPAs to Performing Assets (PA) By Power of Business Intelligence (BI)
10.7 Management of Non-performing Assets
10.8 Basel I, II and III Banking Norms

10.9 Summary
10.10 Keywords
10.11 Review Questions

10.12 Further Readings
Objectives

After studying this unit, you will be able to:
 Know the concept of working capital
 Discuss the importance of working capital

 Identify the factors affecting working capital requirement
 Explain the levels of working capital investment
 Describe the overall working capital policy

Introduction

A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/
or instalment of principal has remained 'past due' for a specified period of time.
With a view to moving towards international best practices and to ensure greater transparency,
it has been decided to adopt the '90 days' overdue' norm for identification of NPAs, from the
year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing
asset (NPA) shall be a loan or an advance where;
 Interest and/or instalment of principal remain overdue for a period of more than 90 days
in respect of a term loan,

 The account remains 'out of order' for a period of more than 90 days, in respect of an
overdraft/Cash Credit (OD/CC),

198 LOVELY PROFESSIONAL UNIVERSITY