What is the full form of the term 'NPA' as used in banking environment?
Show Hint
- Not Profitable Assets
- New Potential Accounts
- Non Performing Assets
- Net Performing Assets
The Correct Option is C
Solution and Explanation
NPA stands for Non Performing Asset, a term used in banking to describe a loan or advance where the borrower has stopped making the scheduled payments of interest or principal for a specified period, usually 90 days as per Reserve Bank of India norms.
Once a loan is classified as an NPA, banks have to set aside provisions against it, which affects their profitability and the amount of fresh credit they can extend. Managing and reducing NPAs is a major concern for banks because a high level of bad loans weakens the overall health of the banking system.
The other options, Not Profitable Assets, New Potential Accounts, and Net Performing Assets, are not real banking terms and do not correspond to any standard terminology used by the RBI or commercial banks.
The correct answer is option 3, Non Performing Assets.
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