Banks are important components of Indian Financial System as an intermediary to collect savings from those having surplus and lending money to those who are in need. NPA is a great problem seriously effecting their health. The RBI and Govt of India are very much concerned and has taken serious steps to overcome this problem. Net NPA’s of 40 listed banks went up to Rs 128533 lakh crores as on 30.9.2013 showing on increase of 30% as against Rs 93109 crores as on 31.3.13. This figure is likely to go up to 1.5 lakh crores as on 31.3.2014. Such alarming situation need to be controlled without any loss of time through various remedial measures.
Banks are important component of Indian Financial system as they are working as key intermediary in collecting savings from those having surplus and making available this money to those who are in need. In discharging these functions, it is essesntial that they have to maintain their health properly so that without any hinderance, they could continue to discharge their basic functions.
Non- performing assets (NPA’s) is a Great decease which is adversely effecting the health of banks in India. In the year 2001, such NPA’s of banks reached Rs 1 lakh crore and to combat this problem, Government brought an special enactment i.e. Securitisatim & Reconstuction of Financial Assets and Enforcement of Security Interest Act 2002 which provided easy process of recovercing NPA’s. As a result, NPA’s problem eased to a great extent. Now this problem is raising head again and particularly in the year 2013-14, NPA’s are causing Great concern.
In simple words, NPA refers to loan advanced by a banks or financial institutioins which are not returned back by borrower even after 90 days from the date loan became due. This amount includes both principal and interest due. Once the loan becomes NPA, the interest recovorable can’t be credited in accounts and on the contary, provision is required to be made on NPA loan as per the provisioning norms prescribed by the RBI.

Author: 1. Sujata Biyani and 2. B.K. Jain