A loan that has not had interest or principal payments made for at least 90 days is classified as a Non-Performing Asset (NPA).
Certain loan types are inherently less likely to become NPAs due to valuable collateral.
Gold loans are highly secure as they are fully backed by gold ornaments or coins pledged by the borrower.
In case of default, banks can readily auction the gold to recoup the outstanding loan balance.
While retail and mortgage loans also have collateral, their recovery can be a protracted and intricate legal process.
Wholesale loans, typically issued to large corporations or major projects, present higher risks due to substantial amounts and economic volatility.
Consequently, gold loans exhibit the lowest risk of becoming NPAs owing to their easily liquidated collateral.