A loan account is considered an NPA when the borrower has not paid any loan installment (principal or interest) for more than 90 days.
NPA Criteria for Farmers
- Short-term crop: Considered NPA after 2 crop seasons of non-payment.
- Long-term crop: Considered NPA after 1 crop season of non-payment.
Before NPA (Special Mentioned Accounts)
| Account | Delay Period |
|---|---|
| SMA-0 | 0 - 30 days |
| SMA-1 | 31 - 60 days |
| SMA-2 | 61 - 90 days |
After NPA (Loan becomes NPA after 90 days)
| Asset Type | Delay Period |
|---|---|
| Substandard Asset | 90 days - 12 months |
| Doubtful Asset | 1 year - 3 years |
| Loss Asset | After 3 years (loan is written off) |
| Type | Example | Nature | Possession |
|---|---|---|---|
| Pledged | Loan on Gold | Movable | Bank's Possession |
| Mortgage | Loan on House | Immovable | Owner's Possession |
| Hypothecation | Loan on Automobile | Movable | Owner's Possession |
Suggested by the Narsimha and Andhyarujina Committees, this act empowers banks to recover their bad loans.
- Banks must send a notice 60 days before taking action on the collateral.
- The first Asset Reconstruction Company (ARC) was ARCIL (Asset Reconstruction Company India Limited).
These are government companies created to recover bad loans. The concept was suggested by Arvind Subramaniam.
1. NARCL (National Asset Reconstruction Company Limited)
51% assets from Government Banks, 49% from others.
2. IDRCL (Indian Debt Resolution Company Limited)
49% assets from Government Banks, 51% from others.
. What is another common term used for Non-Performing Assets (NPAs)?
. A general loan account is classified as an NPA when the borrower fails to pay any installment for more than how many days?
. For a farmer growing a short-term crop, after what period of non-payment is their loan considered an NPA?
. For a farmer growing a long-term crop, after what period of non-payment is their loan considered an NPA?
. What is the classification for an account that has a delay period of 0 to 30 days before becoming an NPA?
. If a loan account has a delay period of 31 to 60 days, what is its Special Mentioned Account (SMA) classification?
. An account with a delay period of 61 to 90 days falls under which category?
. Once an account becomes an NPA (after 90 days), it is classified as a 'Substandard Asset' for what duration?
. After an asset has been an NPA for a period between 1 year and 3 years, what is it classified as?
. When is an asset classified as a 'Loss Asset' (leading to the loan being written off)?
. Which type of collateral is associated with a 'Loan on Gold'?
. What is the nature and possession status of a 'Pledged' collateral (e.g., Loan on Gold)?
. A 'Loan on a House' falls under which type of collateral?
. What is the nature and possession status of a 'Mortgage' collateral (e.g., Loan on House)?
. Which type of collateral is used for a 'Loan on an Automobile'?
. What is the nature and possession status of a 'Hypothecation' collateral (e.g., Loan on Automobile)?
. Which two committees suggested the implementation of the SARFAESI Act, 2002?
. What is the primary purpose of the SARFAESI Act, 2002?
. Under the SARFAESI Act, how many days' notice must a bank send to a borrower before taking action on the collateral?
. What was the name of the first Asset Reconstruction Company (ARC) in India?
. Who suggested the concept of creating 'Bad Banks'?
. In the National Asset Reconstruction Company Limited (NARCL), what is the percentage of assets from Government Banks?
. In the Indian Debt Resolution Company Limited (IDRCL), what is the percentage of assets from Government Banks?