Loan and International Best Practices Essay Example for Free

Loan and International Best Practices EssayA Non-performing summation (NPA) is defined as a credit facility in respect of which the refer and/or installment of principal has die harded past due for a specified achievement of time. Identificationedit NPA is a classification used by fiscal institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principle payments for 90 years the loan is considered to be a non-performing asset.Non-performing assets are problematic for financial institutions since they depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in non-performing loans and often results in ample write-downs. With a view to moving towards international best practices and to ensure greater transparency, it had been decided to adopt the 90 days overdue norm for identification of NPA, from the course of study ending March 31, 2004.Accordingly, with effect fr om March 31, 2004, a non-performing asset (NPA) is a loan or an advance where Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan, The account remains out of order for a period of more than 90 days, in respect of an Overdraft/ money Credit (OD/CC).The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, Interest and/or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. Non submission of Stock Statements for 3 Continuous Quarters in case of Cash Credit Facility. No active transactions in the account (Cash Credit/Over Draft/EPC/PCFC) for more than 90 days. ClassificationeditBanks are required to classify non-performing assets get along into the following three categories based on the period for which the asset has remained non-performing and the realisability of the dues Sub-standard assets a sub standard asset is one which has been classified as NPA for a period not exceeding 12 months. enigmatic Assets a doubtful asset is one which has remained NPA for a period exceeding 12 months.Loss assets where loss has been identify by the bank, internal or external auditor or central bank inspectors but the amount has not been written off, wholly or partly. Sub-standard asset is the asset in which bank have to maintain 15% of its reserves. All those assets which are considered as non-performing for period of more than 12 months are called as Doubtful Assets. All those assets which cannot be recovered are called as Loss Assets.