Maharashtra government appointed a committee to bring a legislation that will improve the recovery of loans given as part of government schemes. The proposed legislation will create a mechanism for forceful recoveries of loans given under government schemes. It will not be applicable to agricultural and other loans.
What are Non performing Assets (NPA)?
Any asset, including a leased asset, becomes a non performing when it ceases to generate income for the bank are called Non Performing Assets or Bad loans. As per RBI guidelines, NPA is defined as under:
- 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’ in respect of an Overdraft/Cash Credit (OD/CC).
- The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted.
- The installment of principal or interest there on remains overdue for two crop seasons for short duration crops.
- The installment of principal or interest there on remains overdue for one crop season for long duration crops.
- The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction undertaken in terms of guidelines on securitization dated February 1, 2006.
- In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.
Net NPA = Gross NPA – (Balance in Interest Suspense account + DICGC/ECGC claims received and held pending adjustment + Part payment received and kept in suspense account + Total provisions held).