Non Performaing Assets also called NPA is the term used in banking and finance sector.
Basically this term (NPA) used by bank in loan department. For better understanding I will take one example which will be more helpful to make you understand.
- A bank gave a loan to any businessman to start business and Rs 10000 installment is fixed per month. But the business went into losses or businessman was cheat so he did not pay any amount back to bank.
In this case bank has certain time limit till it start getting their recovery back. But if not then the bank's capital is finished. This amount is called NPA.
The assets of bank which did not perform any role in getting profit to the organization.
It is calculated in terms of %, in balance sheet, failed loan amount of total Assests will be counted as NPA.
The more the NPA the lower the performance of bank.