Share
What is a ‘Non-Performing Asset’ (NPA) in banking? | npas.
Question
- A. A loan that is fully repaid
- B. A loan that has not been serviced for a specified period
- C. A loan given to a high-credit-worthy borrower
- D. A loan with a very low interest rate
View Answer
correct Answer ( B )
A Non-Performing Asset (NPA) is a loan or advance that has not been serviced by the borrower for a specified period, that is, the borrower has not made any interest or principal payments on the loan for a specified period (usually 90 days) NPAs represent a significant risk to banks, as they represent a potential loss of capital. The higher the percentage of NPAs a bank has the higher its risk profile . Banks are required to make provisions for NPAs, which reduces