We have heard the terms GNPA, NNPA, PCR a lot of times in Banking, but what do they really mean?
A loan is said to be an NPA when it is in default/arrears on scheduled payments of principal or interest. In short, a loan is a NPA if loan payments have not been made for 90 days.
Gross NPA (GNPA)
GNPA is the total figure of loans on which no payments have been paid for 90 days or more. GNPA % is basically the GNPA amount as a % of the total advances which is shown in each Bank’s quarterly results.
Net NPA (NNPA)
It is the amount left after after deducting provisions made for bad loans from GNPA. (GNPA – Provisions = NNPA)
Example of GNPA and NNPA illustration
A Bank has a 100 Rs loan book, 8 Rs of NPAs and 4 Rs of provisions. This means the bank has 8 Rs of GNPA, 4 Rs of NNPA and in percentage terms 8% GNPA and 4% NNPA.
Provisioning Coverage Ratio (PCR)
This is the ratio of provisioning to gross non-performing assets and indicates the extent of funds a bank has kept aside to cover loan losses. For Instance, a company has GNPAs of 100 Rs and they have set aside 50 Rs, then the PCR is 50%.
Combined example -
Suppose a Bank has Rs 100 loan book, 40 Rs of bad loans and 20 Rs of provisions. This means 40 Rs of GNPA(40% GNPA), 20 Rs of NNPA(20% NNPA) and PCR of 50%.
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