How is NPA ratio calculated?
By dividing non performing assets by total loans will give the NPA ratio in decimal form. Multiply by 100 to get the NPA percentage.
What is non-performing assets with examples?
A loan can be classified as a nonperforming asset at any point during the term of the loan or at its maturity. For example, assume a company with a $10 million loan with interest-only payments of $50,000 per month fails to make a payment for three consecutive months.
What are the causes of NPA?
Loans or advances provided by the banks are considered as banks’ assets as banks will earn interest on them. The businesses sometimes default on the loan repayments and this causes banking NPA (non-performing assets).
What are the 4 causes of NPAs?
The factors that are contributing to NPA are poor loan management policy, improper credit appraisal, business failures, poor recovery of receivables, sluggish legal system, industrial recession, and adverse exchange rates etc.
What is a good CASA ratio?
CASA ratio of a bank is the ratio of deposits in current and saving accounts to total deposits. A higher CASA ratio indicates a lower cost of funds, because banks do not usually give any interests on current account deposits and the interest on saving accounts is usually very low 3-4%.
How can we reduce NPA?
Methods on how to reduce NPA in banking sector:
- 1) Debt Recovery Tribunals. The Act, which was passed by the Indian Parliament in 1993, empowers financial institutions to quickly collect debts of ten lakhs or more.
- 2) Lok Adalats.
- 3) Compromise Settlement.
- 4) Credit Information Bureau.
- 5) Sarfaesi Act, 2002.
What are the reasons of NPA?
How does NPA affect the economy?
The impact of rising NPAs can be as follows: Rising NPAs undermine the bank’s image, making the public lose trust in banks. The depositors may withdraw their deposits causing liquidity issues for banks. The lack of liquidity prevents banks from lending for other productive activities in the economy.