Non Performing Assets Definition : Lenders sanction and disburse loans and advances to the borrowers in various forms in the normal course of their business and charge a specific amount of interest depending upon the credit worthiness of the borrow, amount of money borrowed and the time period for which it has been borrowed. However, if the borrower does not pay the previously agreed upon interest and principal instalment to the lender for an extended period of time, the debt obligation becomes a non-performing asset. Explanation : The non-performing asset does not yield any/regular income to the bank/ lender in the form of principal and/or interest payments. If non-performing assets of a lender rise, it affects the profitability and the overall business. Investors also tend to avoid a lender having huge non-performing assets. In recent times, soaring non-performing assets of nationalized banks were a matter of great concern. RBI vide its Master Circular defines “Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances Example : In the recent times we have seen companies like Kingfisher Airlines and spice Jet as large Non-Performing Assets of banks.
Posted on: Tue, 27 Jan 2015 11:08:31 +0000
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