Essay on NPA in Indian Banks

Learn how to write an essay on NPA in Indian banks in 250 or 300 words. NPA essay is asked in 4, 5, 6, 7, 8, 9, 10, 11 and 12 class. Students should now how to write essay on NPA.

Essay on NPA in Indian Banks

Essay on NPA in Indian Banks

The loans provided by the banks to the borrowers are known as assets of the bank. In case, if the borrower is not giving the interest or the principal or both the elements of a loan to the bank, then such a loan will be regarded as a Non-Performing Asset (NPA). Therefore, any asset which does not provide any return to the investors for a particular period of time is called the NPA. This particular period can be of 90 days however it may vary for different countries.

Reasons behind NPAs –

A borrower may suffer from business loss due to amendments in the regulations, national or global financial crisis which leads to reduced profit margins and consequently weakening the balance sheet and leading to NPA. Also, after the slowdown of the economy due to various reasons, NPAs took a greater upsurge. Deceleration of a particular industrial sector, expansion of corporate houses in the boom period when the loan was taken at lower interest rates but later the rates became high that resulted in NPAs. Due to poor administration by the governmental bodies and policy paralysis, which slow down the timeline and project speed and thus leading to NPAs. There are natural reasons such as floods, droughts, or tsunamis which may lead to NPAs.

Impact of NPAs –

Due to NPAs, banking sector lacks in money which would have been used to fund and start other important projects. This ultimately affects the national economy of the country. Banks start providing loans at a higher interest rate so as to maintain their profit margin. They may also redirect the funds from good projects to start the bad ones.

How to deal with NPAs –

Technology should be used effectively to get the early signals. A proper mechanism should be used by the government to identify the unseen NPAs. Banks should resort to forensic audits to know the intention of the borrower. There are many other steps taken by the government to resolve this unending issue however, it is a long way to eradicate this issue out of the country.

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