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What is the significance of Non-Performing Assets (NPAs) in the.
Question
- A. assets that generate high returns
- B. Loans that are performing well
- C. Loans that have not been repaid
- D. Assets owned by the bank itself
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correct Answer ( C )
Non-performing assets (NPAs) are loans or advances that have not been repaid by borrowers within a specific period and represent a significant risk to the financial health of banks . High levels of NPAs indicate poor asset quality and can lead to decreased profitability, increased capital requirements and even potential bank failures . NPAs tie up bank funds that could be used for lending to productive sectors of the economy . Banks employ various strategies to recover NPAs, including restructure loans, initiating legal proceedings and