What is Gross Non Performing Asset (Gross NPA)?
Gross NPA is the sum of all loan assets that are classified as NPAs as per RBI guidelines.
What is Gross Non Performing Asset Ratio (Gross NPA Ratio)?
Gross NPA Ratio is the ratio of Gross NPA to Gross Advances(Loans) of the bank.
Gross NPA Ratio = Gross NPA / Gross Advances(Loans)
What is Net Non Performing Asset (Net NPA)?
Net NPAs are calculated by deducting Provisions from Gross NPAs.
Net NPAs = Gross NPAs – Provisions
What are the current Provisioning Norms?
i. Substandard Assets:
A general provisioning of 15% on the total outstanding amount is made if the loan is secured.
For unsecured loans the total provisioning that needs to be done is 25% on the outstanding balance.
ii. Doubtful Assets:
A provisioning of 100% on the total outstanding amount is made if the loan is unsecured.
For secured loans, the total provisioning is in the range of 25% to 100 % on the outstanding balance depending upon the period for which the asset has remained doubtful.
iii. Loss Assets:
Loss assets should be completely written off.
If loss assets are permitted to remain on the books for any reason, 100 % of the outstanding amount should be provisioned.
What is Non Performing Asset Ratio (NPA Ratio)?
NPA Ratio is the ratio of Net NPAs to Loans Given by the bank.
NPA Ratio = Net NPAs / Loans Given
The NPA Ratio is used as a measure of the overall quality of the bank's loan book.
