A thread on Gross & Net NPAs
1 A loan gets classified as NPA if interest or principal amount remain unpaid for 90 days or more
2 Bank has to suspend interest on the loan account, this interest though keeps accruing & is parked in a separate account called-Interest in Suspense
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1 A loan gets classified as NPA if interest or principal amount remain unpaid for 90 days or more
2 Bank has to suspend interest on the loan account, this interest though keeps accruing & is parked in a separate account called-Interest in Suspense
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3 Bank has to reverse the interest income earned in last 90 days which goes to interest in suspense
4 Gross NPA is the total amount of unpaid principal for 90 to 180 days
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4 Gross NPA is the total amount of unpaid principal for 90 to 180 days
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5 Net NPA is calculated as Gross NPA less (bal in interest in suspense account+any part payment recd & kep in IIS account+total prov held)
6 When a new loan is given bank needs to set aside a small amount from operating profit called provisions-this is called std provision
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6 When a new loan is given bank needs to set aside a small amount from operating profit called provisions-this is called std provision
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7 A prov taken against a specific loan that gone beyond 90 days is called specific provision
8 Gross & Net NPA divided by total loan assets gives you GNPA & Net NPA in %age terms
9 If a borrower makes a repayment on a NPA account & loan becomes current-
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8 Gross & Net NPA divided by total loan assets gives you GNPA & Net NPA in %age terms
9 If a borrower makes a repayment on a NPA account & loan becomes current-
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--then the specific prov gets reversed & interest in suspense moves to the P&L of the bank
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