NPA Criteria

1. NPA Criteria A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or instalment of finance principal has remained ‘past due’ for a specified period of time. NPA is used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA ) is a loan or an advance where; Interest and/or instalment of principal remain overdue for a period of more than 91 days in respect of a term loan, The account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC), The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, Interest and/or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. Non submission of Stock Statements for 3 Continuous Quarters in case of Cash Credit Facility. No active transactions in the account (Cash Credit/Over Draft/EPC/PCFC) for more than 91days Effects of NPA: The day to day operations in the account becomes difficult as Bank starts adjusting money deposited against the dues. The approach of the Banker towards the borrower is more of lender – borrower rather than financer –customer relation. The borrower is in a helpless situation and at the mercy of the lender Bank, demoralising the borrower.

2. Most important the borrower’s entire focus shifts from business revival to arranging money inorder to service the loan. The reputation of the borrower is adversely affected. We are of the opinion that the borrowers are unaware about the legal system and come under the immense pressure laid down by the lending institutions. The borrower usually requests to give some time to streamline the business through which the irregularity in the account could be met. It is a pity condition that instead of supporting such borrowers lending institutions usually threatens the borrowers for taking forceful possession of the mortgaged assets if the borrower fails to remit the money. The lending institutions are hereby requested to help deserving units revive their business by offering maximum support, guidance and revival packages to come out of the woods. The lending institutions may refer such accounts to competent NPA Consultants as soon as the signs of industrial sickness become visible. Only financial paper projections are not enough. We at NPA consultant possess innovative mind set through which we can guide both the borrower and the Banker to resolve the pressing issues. Success Mantra to handle the NPA situation Don’t wait till the problem arises Seek professional guidance to know your rights as a borrower take necessary steps at the right time Don’t come under the pressure of Bank Don’t compromise on your business requirements. Be focused on business Don’t make over commitments fearing the “NPA’ tag Take steps to safeguard your valuable assets Work out ways to raise finance with help of a professional guide Ultimately settle with the Bank on reasonable terms