NPA or NonPerforming Assets and Classification of Loan Account

  NPA and its Classification-  NPA or NonPerforming Assets:When a asset losses to generate for Banks and financial institutions is known as NPA. 
 
Classification of NPA:NPA shall be a loan an advances where- (I) Instalment of Principle and interest remain overdue for a period of more than 90 days increase of term loan. (II) When the amount remains out of order from a period of more than 90 days in respective of an over draft and Cash Credit. (III) When the bill remain over due for a period of more than 90 days in case of bill purchase and discounted. (IV) Any amount to be received remains overdue    for a period of more than 90 days in respective of other account. In Case of Agricultural Loan an advances (NPA):(I) A loan granted for short duration will be treated as NPA if  the instalment of principle and interest there on remain overdue for two corpsession. (II) A loan granted for a long duration corps will be treated as NPA if instalment of principle and interest there on remain overdue for a period of of one corp session.                                                                                                  Classification of Loan Account:Standard regular account -no time limit. standard irregular account- no time limit.  Special account zero: 1-30days.  Special account 1: 31-60days.  Special account 2: 61-90days.  Substandard account : upto 12 months.  Doubt full account: when substandard account remains overdue for a period of 12 months . Doubt full I account: 2nd year. Doubt full II account : 3rdyear and 4thyear. Doubt full III account: 5th year onworld .  Loss account : No time period.                                                 
 
SARFAESI Act-2002:  Full name  Securitization and Reconstruction of Financial Assets and enforcement of Security Interest. This act provide three alternative methods for the recovery of NPA. Namely-(i) Securitization (ii) Assets Reconstruction (iii) Enforcement of security without the intervention of the court.   According to this act-NPA loan account where the amount is less than 25% of principle and interest are not eligible to be deal in the SERFASI Act . It is applies only two loan above one lakh. 
 
ARC : full name Assets Reconstruction Company, it is the company which is setup with the objective taking over NPA from Banks. They buy NPA from Bank and try to get maximum profit out of it . They have to register with RBI .                                                                                              

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