Question

What is the full form of the term 'NPA' as used in banking environment?

• A. Not Profitable Assets
• B. New Potential Accounts
• C. Non Performing Assets
• D. Net Performing Assets

Hint:

It refers to a loan where repayments have stopped for a set period, usually 90 days.

Answer 1

The Correct Option is C

In banking language, NPA is short for Non Performing Asset. This term is applied to any loan or advance where the borrower has failed to pay interest or principal on time for a certain stretch, which the Reserve Bank of India generally sets at 90 days past due.

Once a bank tags a loan as an NPA, it must keep aside provisions to cover potential losses on that loan, which cuts into its profits and limits how much new lending it can do. Because of this, keeping NPAs low is a constant priority for banks, since a large pile of bad loans can drag down the stability of the entire banking sector.

The remaining choices, Not Profitable Assets, New Potential Accounts, and Net Performing Assets, are made up terms that are not actually used in banking or by the RBI.

So the correct expansion of NPA is Non Performing Assets, which is option 3.