Stressed assets, which include NPAs, restructured loans, and written off assets, are a major economic risk for India's banking sector as stressed assets levels have increased. Stressed assets provide an important indicator of a bank's financial health. NPAs refer to loans where interest or principal has remained unpaid for 90 days or more. Restructured loans are problematic assets that have been modified through measures like extended repayment periods to avoid being classified as NPAs. Written off assets are loans that banks have removed from their financial statements through compensation. The high level of stressed assets, currently at 11.5% of total loans, poses a significant problem particularly for India's public sector banks.

1. STRESSED ASSETS

2.  Now stressed assets are getting increased
attention as the trend of deteriorating asset
quality has emerged as a big economic risk
for the Indian banking sector. Stressed assets
is a powerful indicator of the health of the
banking system. To understand stressed
assets we have to understand NPA and
Restructured assets. This is because:
 Stressed assets = NPAs + Restructured loans +
Written off assets
Introduction

3.  Assets of the banking system comprises of loans
given and investment (in bonds) made by banks.
Quality of the asset indicates how much of the
loans taken by the borrowers are repaid in the
form of interests and principal. The most
important scale of asset quality is Non Performing
Assets (NPA). An NPA means interest or principal
is not repaid by the borrower during a specified
time period.
Non Performing Assets

5. A loan whose interest and/or installment of
principal have remained 'overdue ' (not paid)
for a period of 90 days is considered as NPA.
What is an NPA?

6. Restructured asset or loan are that assets which got an
extended repayment period, reduced interest rate,
converting a part of the loan into equity, providing
additional financing, or some combination of these
measures. Hence, under restructuring a bad loan is modified
as a new loan. A restructured loan also indicates bad asset
quality of banks. This is because a restructured loan was a
past NPA or it has been modified into a new loan. Whether
the borrower will repay it in future remains a risky element.
Corporate Debt Restructuring Mechanism (CDM) allows
restructuring of loans.
What is restructured loans?

7. Written off assets are those the bank or lender doesn’t
count the money borrower owes to it. The financial
statement of the bank will indicate that the written off
loans are compensated through some other way. There
is no meaning that the borrower is pardoned or got
exempted from payment.
What is written off assets?

8. In the recent past, the Reserve Bank of India has
taken various regulatory measures to strengthen
the lenders’ ability to deal with stressed assets viz.,
• Framework for Revitalising Distressed Assets,
• Flexible Structuring of Project Loans,
• Strategic Debt Restructuring Scheme,
• Scheme for Sustainable Structuring of Stressed
Assets, etc.

9. Total stressed assets in Indian banks was 11.5%
of Rs 75 lakh crore outstanding loans at end-
March 2016, with the public sector banks
leading the strain at 14.5%.