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The IUP Journal of Bank Management
The Problem of NPAs: Some Facts Relating to Commercial Banks in India
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This paper is an attempt to understand the growth of NPA, the reasons behind it and the extent of its spread across sectors. The paper gives an insight into the policy implications which could be governed by banks in order to control the devastation caused by NPA. This paper is divided into four parts: First it explains the macro level analysis among various variables such as GDP, Credit Growth, Gross NPA and GDP. Next, it explains sector-wise analysis and bank group-wise analysis of banking sector. Finally, the mechanism to deal with NPA is discussed.

 
 
 

The banking sector in the recent past has witnessed a paramount change. The Reserve Bank of India (RBI) has introduced in a phased manner the prudential norms for income recognition, asset classification and provisioning for the advances of the banks so as to move towards greater consistency and transparency in the accounts receivables. As a part of this exercise, RBI defined NPA as: “An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. A NPA is a loan or an advance where; interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a term loan; the account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC); the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted; interest and/or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose, and any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.”

 
 
 
Bank Management Journal, The Problem of NPAs, Some Facts Relating to Commercial Banks in India