Non-performing assets (NPAs) are loans or advances that are in default, meaning the borrower has not made scheduled payments of principal or interest for a specified period.
This period is typically 90 days in most countries, but can vary depending on the regulatory environment.
Types of NPAs:
Substandard assets: These are loans that are past due for more than 90 days but less than 12 months.
Doubtful assets: These are loans that are past due for more than 12 months but less than 36 months.
Loss assets: These are loans that are considered to be uncollectible and have little or no value.
NRACL
NRACL stands for National Asset Reconstruction Company Ltd.
It is a special purpose vehicle (SPV) set up by the Government of India to acquire and manage stressed assets of banks.
Objectives of NRACL:
To resolve the problem of non-performing assets (NPAs) in the Indian banking system.
To revive stressed assets and bring them back into the productive sector.
To improve the financial health of banks by reducing their NPAs.
To create a market for distressed assets in India.
Functions of NRACL:
Acquire stressed assets from banks through various methods, such as cash purchase, security receipts (SRs), and asset reconstruction companies (ARCs).
Manage and restructure the acquired assets to improve their value.
Sell the restructured assets to new investors.
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