An NPA can be defined as a nonperforming asset (NPA). These loans and advances do not pay back a portion of the amount lent. There are several types of NPAs. The complete form for each of them can be found on the website of the National Payments Corporation.
Non-Performing Assets
Non-Performing Assets are loans that have fallen behind on payments and are no longer recoverable. This is a problem that can be devastating for banks. It hurts their credit rating and credibility. Non-performing assets are a genuine concern for banks, as they eat up a significant part of their edge.
While NPAs can be a problem for banks, the good news is that many of them are manageable. The volume and duration of the past due loans that have fallen behind will ultimately determine how much of a burden these assets will place on a lender’s balance sheet. While most banks can absorb a small amount of NPAs, a high volume will pose a severe risk to the lender’s financial stability and future success.
A lender must consider all risks before providing a loan. Non-performing assets burden lenders, disrupt their cash flow, reduce their earnings, and decrease their capital for subsequent loans. The Reserve Bank of India has outlined several categories for non-performing assets. A bank is considered to be in the category of a non-performing asset if at least 10% of the amount owed is not repaid.
Non-Recovery Loans
Non-Recovery loans are loans that have not been paid back. They are deemed bad debts, and a bank may suffer a loss if more of these loans become past due. A bank may also have to take action to enforce recovery on these loans. It can take possession of the collateral pledged as security for the loan and sell it to recover the amount owed.
Non-Performing Advances
Non-Performing Advances are loans and advances where the principal or interest payments have not been made for 90 days or longer. These loans and advances are classified as Non-Performing Assets, meaning that the lender is no longer earning any income from them. Non-Performing Advances are a common problem for banks.
Non-performing assets (NPAs) are not performing up to standard, affecting the bank’s creditworthiness. Typically, the timeframe for defining a non-performing asset is 180 days, although international norms vary from 45 to 90 days. Standard assets, by contrast, carry an average risk and do not need special provisions.
Non-Performing Advances are loans and advances that are past due, which hurt a bank’s profits. In some cases, such advances can become so large that they threaten to rob the bank of profit. These loans are a burden, and banks will have to make a lot of extra money to recover these loans.
Lok Adalats
Lok Adalats are a forum where the bank and the borrower can come together to resolve outstanding liabilities. The parties can then agree on a settlement amount and file it in the appropriate court. Following this, the court issues the order, which cannot be appealed. In some cases, the banks and borrowers may also opt for corporate debt restructuring, a way to reduce the debt burden and increase the repayment period.
The Lok Adalat has the same powers as a civil court and can compel witnesses and examine them under oath. It can also requisition any document or copy of a public record. The court may conduct the proceedings in any way it deems appropriate. The parties may choose to seek a neutral third party if they do not feel comfortable with a civil court.
The Lok Adalats are highly effective in settling money claims. The tribunals are particularly useful in matrimonial cases, partition suits, and damages claims. They can also take up other cases, including civil and compounded criminal cases. The decision of the Lok Adalat is considered final and cannot be appealed by either party.
