Non -Performing Assets [NPA]

  • An asset, including a leased asset/ Investment, becomes non performing when it ceases to generate income for the bank.
  • A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months.
  • A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.


  • Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. 2002.
  • Banks utilize this act as an effective tool for bad loans (NPA) recovery
  • Upon loan default, banks can seize the securities (except agricultural land) without intervention of the court.
  • SARFAESI is effective only for secured loans where bank can enforce the underlying security, like hypothecation, pledge and mortgages. In such cases, court intervention is not necessary.
  • Provisions under the Act shall not apply to — a) any security interest created in agricultural land, (b) any security interest for securing repayment of any financial asset not exceeding one lakh rupees, (c) any case in which the amount due is less than twenty percent of principal and interest amount.