Question 30 of 37
Q.Describe about Non-Performing Asset.
Tamil Nadu DgeTamil Nadu HSC (DGE) Commerce Board 2025Subjective· 3mImportance★★★★★
81% · 30/37 Questions
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Start your 14-day free trial to unlock the full solution →An NPA is a bank loan on which interest or principal remains overdue for 90 days or more, so it stops earning income for the bank.
Banks earn income mainly from interest on the loans they give. When a borrower fails to repay, the loan becomes a bad or 'non-performing' asset.
- Meaning: a loan or advance is treated as an NPA when interest and/or the principal instalment remains overdue for a period of 90 days or more (as prescribed by the RBI).
- Such an asset ceases to generate income for the bank.
- NPAs are classified into sub-standard, doubtful and loss assets depending on how long they have remained overdue.
- Effects: high NPAs reduce a bank's profits, lock up funds, lower the ability to lend and can threaten the bank's solvency. …
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