A non-performing asset (NPA) refers to a loan or advance that is in default or in which scheduled payments have not been made for over 90 days. NPAs are classified as substandard, doubtful, or loss assets depending on how long they have been non-performing. Rising NPAs are a major threat to the banking sector and are caused by factors like bad lending practices, competition, internal management issues, economic crises, and external environmental conditions. High NPAs reduce bank profitability and liquidity. Tools used to recover NPAs include lok adalats, debt recovery tribunals, the SARFAESI Act of 2002, compromise settlements, and credit information bureaus. The Indian government

2. What is Non-Performing Asset (NPA)
It is a major threat to banking sector is prevalence of
Non-PerformingAssets (NPAs). NPA represent
bad loans, the borrowers of which failed to satisfy
their repayment obligations.
A nonperforming asset (NPA) refers to a classification for loans
or advances that are in default or are in arrears on scheduled
payments of principal or interest. In most cases, debt is
classified as nonperforming when loan payments have not been
made for a period of 90 days.While 90 days of nonpayment is
the standard, the amount of elapsed time may be shorter or
longer depending on the terms and conditions of each loan.

3. Asset
Non-
performing
Asset
LossAssetDoubtful
Asset
Sub-standard
Asset
Performing
Asset
Standard
Asset
CLASSIFICATION

4. Substandard Asset: Substandard asset is one which has
remained NPAfor a period less than or equal to 18 months.
Doubtful Asset: Doubtful asset is one which has remained NPA
for a period exceeding 18 months.
Loss Asset: A loss asset is one where loss has been identified
by the bank or internal or external auditors or the RBI
inspection but the amount has not been written off wholly. In
other words, such an asset is considered uncollectible and of
such little value that its continuance as a bankable asset is not
warranted although there may be some salvage or recovery
value.

5. "As per Reserve Bank of India (RBI) data on global
operations (provisional data for the financial year ending
March 2019), gross NPAs of PSBs have declined by Rs
89,189 crore from the peak of Rs 8,95,601 crore in March
2018 to Rs 8,06,412 crore in March 2019 (provisional data).
As of March 31, 2018, provisional esimates suggest that the
total volume of gross NPAs in the economy stands at Rs
10.35 lakh crore. About 85% of these NPAs are from loans
and advances of public sector banks. For instance, NPAs in
the State Bank of India are worth Rs 2.23 lakh crore

7. 1.Bad Lending Practices
When loans are given away by banks without doing a thorough background
check of borrowers for their repaying capacity, financial health and intent to
repay etc.
2.Competition
When banks compete among themselves and as a result disburse unsecured
loans.
3. Incremental Component
When the internal bank management is affected such as the terms of credit,
credit policy etc.
4. Crisis
When the revenues and profits are observed lower than the average rate.
REASONS FOR INCREASED NPA’s

8. 5.Overhang Components
When NPAs are an outcome of environmental factors like when the agricultura
loans are not repaid due to the slow crop yield or lack of natural facts like rain,
water, sunlight etc.
•Other factors
1. Project not completed in time
2. Failure of business
3. Willful defaulters
4. Natural calamities
5. Diversion of funds

9. IMPACTOFNPA
•Reduce profitability
•Liquidity & Opportunity Cost
•Waste of valuable management time
•Impact on share prices
•Loss of credibility as high NPA reflect poorly on
Management
•Gross NPA more than 10% in case of Co-op. Banks
Supervisory Action follows & restrictions imposed.

10. NPA RECOVERINGTOOLS
•1. Lok adalats
•2. Debt Recovery Tribunals (DRTs)
•3. SARFAESI ACT, 2002
•4. Compromise Settlement
•5.Credit Information Bureau

11. LokAdalats
Small value loans up to Rs 20 lakh can be amicably settled between
the borrower and the lender using the forum of Lok Adalats.
Debt Recovery Tribunals (DRTs)
•Narasimham Committee Report I (1991) recommended the setting up
of Special Tribunals to reduce the time required for settling cases.
Accepting the recommendations, Debt Recovery Tribunals (DRTs)
were established.
•There are 22 DRTs and 5 Debt Recovery Appellate Tribunals.
•In this court, only the recovery cases of Rs.10 Lacs & above can be
filed.

12. SARFAESI ACT, 2002
•The SARFAESI Act, 2002 gives powers of "seize and desist" to banks.
Banks can give a notice in writing to the defaulting borrower requiring it
to discharge its liabilities within 60 days.
•The Act provides three alternative methods for recovery of non-
performing assets, namely:
- Securitization
- Asset Reconstruction
•Bad loans with outstanding above Rs. 1.00 Lac.
•NPAloan accounts where the amount is less than 20% of the Principal
& Interest are not eligible to be dealt with under this Act.

13. Compromise Settlement
This scheme helps in recovery of NPAs up to ₹10 crore
through a simplified non-discretionary mechanism.
Credit Information Bureau
Third party agencies such as CIBIL helps banks with data on
the financial health of the borrower.The Credit Information
Bureau maintains records of individual defaulters and
shares it with the respective banks to aid them in making
effective lending decisions. For this, banks may be charged
a fee.

14. Conclusion
Government of India is trying hard to rescue the banks,
particularly looking at the downfall of PSBs in the
country. Recently, the center had announced
recapitalization of PSBs with ₹2.11 lakh crore However,
there is still a strong need felt for stricter laws in NPA
management.Wilful defaulters particularly must be
treated under a separate, dedicated Act. Moreover, there
must be rigorous practices adopted to take correct
decisions for granting loans to individual borrowers or
companies.

15. THANKYOU