Economy Simplified: NPAs (Non Performing Assets) and Stressed Assets explained.

1. Non-Performing Assets (NPAs) are the bad loans of the banks.
2. Under it, a loan is considered NPA if it has not been serviced for one term (i.e., 90 days). This is known as the ‘90 day’ overdue norm.
3. For agriculture loans the period is tied with the period of the concerned crops—ranging from two crop seasons to one year overdue norm.
NPAs were classified into three types:
(a) Sub-standard: remaining NPAs for less than or equal to 12 months;
(b) Doubtful: remaining NPAs for more than 12 months; and
(c) Loss assets: where the loss has been identified by the bank or internal/external auditors or the RBI inspection, but the amount has not been written off.
Special Mention Accounts (SMA)
1. It is a tool for early stress discovery of bank loans.
2. Introduced as a corrective action plan.
3. Accordingly banks should identify potential stress in the account by creating a new sub-asset category viz. ‘Special Mention Accounts.
According to the stress level such loans are categorised into three categories:
SMA 0 ( Delay up to 30 Days)
SMA 1 ( Delay up to 31-60 Days)
SMA 2 ( Delay up to 61-90 Days)
4. The loans still remain standard even in these categories and turn bad only after a delay in payment of more than 90 days.

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