Essay On NPA In Indian Banks | NPA Essay In 250+ Words
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Essay On NPA In Indian Banks | NPA Essay
The common man of the country deposits his hard-earned money in banks. Banks give this accumulated capital as a loan to needy people and industrialists.
While giving a loan, it is expected that the person or industrialist should return this money to banks through EMI.
But when this loan does not come back to the bank, then it goes into the category of NPA. In simple words, it is a submerged debt of Banks.
According to banking rules, when the EMI, Principal amount or interest of a loan does not come within 90 days of the due date, it is called NPA.
That is, when a bank stops getting returns from a loan, then it becomes an NPA or bad loan for the bank.
What is NPA?
The Non-Performing Asset is a classification used by financial resources that deals with the non-repayment of debt. When a borrower fails to pay interest or principal till 90 days, the loan given to him is treated as NPA, and Banks show such loans in the NPA column of their balance sheet.
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Three Main Types of NPAs: –
- Substandard Asset
- Doubtful Asset
- Loss Asset
When a loan remains NPA for 12 months or less, it is called Sub-Standard Asset. In such a loan, the total assets or collateral of the borrower is not so much that the entire dues can be recovered from it.
When a debt remains subordinated for 12 months, it falls into the category of Doubtful Asset. The possibility of recovery of the entire amount of such loan is very less.
When the bank assumes that the possibility of recovery of any of its debts is negligible or is over, then it is called a Loss Asset.
How to Overcome the Problem of NPA?
The government is constantly making efforts to resolve the NPA cases in public sector banks.
There are actually two types of borrowers under the NPA. First, those who are unable to pay arrears due to domestic and global recession or other reasons.
And others who do not want to intentionally repay the loans of banks. The government has taken measures to deal with the defaulters of both categories.
Due to the economic downturn, the government has made several schemes for the loans which are not being paid.
Similarly, the central government has made available Rs 70000 crore capital to government banks in 3 years and if required, more capital will be made available.
To make the recovery proceedings more effective, the “SARFAESI Act” and Debt Recovery Tribunal Act have been amended.
To bring transparency, banks have been asked to issue a list of borrowers whose debts have been waived.
Stringent action should be taken against the traitors who did not return the loan intentionally so that such incidents do not happen in the future.
In order to help the farmers, their debts have been restructured and the debt of farmers has also been waived in some states.
In addition, the Bankruptcy Code 2016 has been introduced. With its implementation, unnecessary delays in the recovery of loans and losses arising from it will be avoided.
In the event of failure to repay the loan, the company will be given an opportunity to repay its loan within a certain time or declare itself bankrupt. Similarly, if anyone is found guilty of debt, then there is a provision of punishment of 5 years.
Conclusion (Essay On NPA In Indian Banks)
Banks are the mainstay of any economy. Banks are not only responsible for the steady and balanced flow of capital in the market, but they also have the responsibility of the correct operation and management of the system.
If the banking system does not discharge its duties with full devotion, then its direct effect is visible on the credit of the bank as well as the economy of the country.
It is clear from all these things that, if no hard decision is taken in respect of these problems in time, it will not be easy to emerge from its effects.
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