NPA - Meaning, Causes & Types | SBI PO Prelims & Mains Preparation - Bank Exams PDF Download

What is NPA

NPA Full Form : Non-performing Assets

Types of Assets

• Standard assets : Assets which are generating regular income to the bank
• Sub-standard assets : An asset which is overdue for a period of more than 90 days but less than 12 months
• Doubtful assets : An asset which is overdue for a period of more than 12 months.
• Loss assets : Assets which are doubtful and considered as non-recoverable by bank, internal or external auditor or central bank inspectors.

Sub-standard assets, Doubtful assets and Loss assets are NPA.

Causes of NPA

• Default - One of the main reason behind NPA is default by borrowers.
• Economic conditions - The Economic condition of a region affected by natural calamities or any other reason may cause NPA.
• No more proper risk management - Speculation is one of the major reason behind default. Sometimes banks provide loans to borrowers with bad credit history. There is a high probability of default in these cases.
• Mis-management - Often ill-minded borrowers bribe bank officials to get loans with an intention of default. 
• Diversion of funds - Many times borrowers divert the borrowed funds to purposes other than mentioned in loan documents. It is very hard to recover from this kind of borrowers.